Baroness Byford: My Lords, does the Minister accept that there are different weights of plastic bags? Obviously, the heavier ones can be re-used much more often. An earlier question referred to supermarkets, but it would be enormously helpful if the discussions went right across the retail industry. We need to convert people who sell goods to stop advertising in a way that says, "No, we want to use our own bags. We don't want to have your reusable ones". My local butcher was a very good example of that: when I took my own bag, he said clearly, "I cannot possibly let my high-class meat go out in that bag".

Lord Davies of Oldham: No, my Lords, but 50 per cent of the population is quite a significant proportion so we do have to bear that in mind. However, I recognise what my noble friend says and certainly long-distance flights are taken more often by the better-off sections of the community. But we have an industry and a role in aviation in which we are an important world leader. So while we recognise that adaptation is necessary—enforcement may well become necessary for certain aspects of the operation of airports in terms of greener strategies—we must balance the obvious needs of the community for certain levels of air travel with the growing problem of emissions which has been so clearly identified in the reports to which my noble friend referred.

Baroness Andrews: My Lords, I cannot possibly anticipate what Sir Michael Lyons is going to recommend. We have made it clear that that the council tax should be retained; we are not in favour of local taxation, and I am not entirely sure who is these days. It is another case of having to wait and see what Sir Michael Lyons comes up with.

Baroness Young of Old Scone: My Lords, this amendment is grouped with Amendments Nos. 6 to 10. There are two issues here, and I shall deal with Amendment No. 5 first. It aims to limit the application of the better regulation principles to issues of policy rather than to individual regulatory decisions. The better regulation principles are fine things. Indeed, many regulators across Britain are moving to adopt them and to build them into their practice. But my concerns about them being applied simply at policy level rather than at the level of individual regulatory decision is that they are capable of being challenged on the grounds of the principles rather than on the grounds of practice. I shall explain what I mean by that.
	I believe that being able to challenge regulators on the principles in their regulatory decisions will mean that they will face more litigation. Even if they do not face more litigation, they could behave very defensively and regulatory decisions could take longer and be more costly. Of course, that flies in the face of the Bill and its otherwise excellent intentions to ensure better regulation—not slower, more bureaucratic and expensive regulation.
	There are a number of individuals for whom that would be a good avenue through which to challenge regulatory decisions. Vexatious individuals who know that they cannot challenge a case on their compliance or otherwise with the law as to whether they created the nuisance or damage, or whatever the law is aiming to prevent them doing, would instead bring a procedural challenge against a decision either to delay or to have a decision overturned. Defendants who could not hope to succeed in challenging their culpability in a case might still bring that procedural challenge. For example, if a decision were made entirely on the principle of being risk-based, which is a fundamental principle of better regulation, it might be challenged on the basis that it was not consistent, which is another fundamental principle of better regulation.
	The two are fine judgments and placing this as a statutory requirement means that we will have to test the fine judgments more often in the courts. I am sure that regulators will be able to defend their actions successfully in such cases, but I am not sure that that is the best use of public funds or that it is in the interests of better regulation to have to do so. Were the principles to apply at the policy level, rather than at the level of individual regulatory decisions, I believe that there would be sufficient spur to the regulators to behave in consistency with the principles, rather than propelling them to be defensive, slower, more bureaucratic and lengthy in the face of the risk of vexatious legal challenge. That is the content of Amendment No. 5.
	On the Government's side, I have no doubt that we will be told that the solution to this problem is the proposed listing order. However, one needs to be alert to the nature of the listing order because it will be brought upon one at some stage in the future. The intention is to list all the regulatory functions that will be subject, first, to the principles and, secondly and separately, to the code. Considering the number of regulatory functions in this country, it will be a very long and complex list and it will apply different standards for different regulatory functions. It will be consulted on and a decision will be made on it in this House, so I am prepared to be very bored and confused by it. The worst issues will not be our boredom and confusion, but that it will not provide the businesses, which we aim to regulate more effectively and with less bureaucracy, with the clarity they need and the transparency which the Bill promotes. I do not think that the clause as it stands is an example of better regulation and I believe that my amendment would help.
	Amendments Nos. 6 to 10 contain only one issue, which is the nature of the compliance code. I have considerable concerns about its being a statutory code. I would prefer to see it reframed as normal ministerial guidance. At the moment, the Bill has a statutory statement of the principles and although the code operates at a general policy and principle level, rather than at the level of individual regulatory decisions, I believe that the same sorts of vexatious litigation that I have outlined in regard to Amendment No. 5 will be possible in regard to Amendments Nos. 6 to 10.
	The code is a one-size-fits-all proposition. Regulators come in many shapes and sizes. Indeed, we are told that, in the principles of good regulation, flexibility to meet individual circumstances is an admirable quality, but alas, that is not to be the nature of the code. It is to be a one-size-fits-all code, which I believe is very inflexible. For example, the draft code requires regulators to intervene only where there is a clear case for protection, but what sort of protection? Different sorts of protection require different principles to be invoked. In my primary background of environmental protection, the precautionary principle has to be invoked from time to time and the regulator has to intervene before there is a clear case to prevent future damage to the environment.
	It is unfortunate that we have to agree the nature of the code when we have not yet seen a near-final draft. I urge the Government to ensure that, if there are substantial codes fundamental to Bills, as happens from time to time, we have the opportunity to see them at that near-final stage before we are asked to approve the Bills. The code will not be applied only at general policy level, but I believe, as I said with regard to Amendment No. 5, that the same opportunity of challenging individual regulatory decisions while masquerading as a challenge on policy and principle will be taken by those who wish to be vexatious. Some areas of legislation are already more vexatious than others.
	If the contents of the statutory code were reframed as guidance, these concerns would be removed while still giving guidance to regulators on how to implement better regulation. That would mean that we could take account of progressive regulators who already have in place their own non-statutory codes and would not be penalised for having made good progress. All regulators, including the laggards, could be required to draw up their own strategies in line with the guidance but tailored to the needs of different individual regulatory regimes. There could be a requirement on them to report annually on their performance and progress.
	I hope that this admirable Bill will not be marred by failing in its own principles. I look on it as one that regulates the regulators; in the context of the code, it will fail the test of better regulation if we end up with mechanisms that result in the more defensive, slower, less flexible and more expensive behaviour of regulators as they seek to make their decisions wholly defensible in the face of potential vexatious challenge under the code.
	I recognise that it is very late in the day to be raising this issue—alas, I have not been able to take part in the Bill's proceedings for some time. I hope that we can get some assurances from the Government that they will at least take account of the fears that I have expressed about the ultimate nature and application of the code to minimise the opportunity for vexatious legislation. I beg to move.

Baroness Howarth of Breckland: My Lords, I support Amendment No. 5. The principles of better regulation—proportionality, accountability, consistency and transparency—are well targeted in terms of broad policy development. I apologise for not being here for the Committee stage of the Bill when I might have understood this better, but as I understand it, it proposes that they should apply at the level of the individual enforcement officer.
	I declare an interest as a board member of the Food Standards Agency and deputy chair of the Meat Hygiene Service. In both organisations, the Bill would seriously hamper how our regulations are enforced. Regulators could not enforce against one individual or business to make an example but would have to enforce against every recalcitrant individual business. That is obviously impractical and would not help us to move towards better regulation.
	We are less fussed about the code but would be very concerned if we lost the capacity for modifications to be laid before Parliament, as might well be suggested in the noble Baroness's later amendments. We support Amendment No. 5.

Lord Bassam of Brighton: My Lords, before I reply to the substance of the amendments, I should like to thank my noble friend Lady Young for writing to me between the stages of the Bill and setting out very clearly the rationale behind her amendments. I am very grateful to my noble friend for taking the time to meet the Better Regulation Executive officials and exchange views, which we found very helpful. I hope that it was a productive meeting. I should also like to welcome my noble friend back into the fold of the House of Lords. We have missed her over these many months. I hope that we shall see more of her because of her very constructive approach to this and many other issues.
	I will set out in some detail why the Government do not think that these amendments should form part of the Bill, although we recognise that they touch on very important issues and reflect back to issues raised at an earlier stage with such subtlety that I clearly missed the true import of the amendments of the noble Lord, Lord Norton of Louth.
	Part 2 supports the Government's aim of bringing about risk-based, consistent, proportionate and targeted regulation and is designed to instil a change in the behaviour of regulators. The Hampton review covered the work of 63 national regulators and 468 local authorities and found that while the UK's regulatory reform regime is well respected internationally, fewer than half the regulators in scope use risk assessment to reduce enforcement activity on high-performing business, and even where risk assessment is used, regulators' activity is often not closely linked to it.
	Given the variety of functions regulators have and the variety of contexts in which they operate, inconsistency of approach is a real risk. That inconsistency causes difficulties for those who are regulated, in particular, the small business sector. That is what Philip Hampton's report Reducing administrative burdens found and that is what we are trying to put right through changing Part 2 of the Bill.
	Part 2 uses a two-pronged approach to achieve this: first, a code of practice for regulators; and, secondly, the principles of good regulation. I should like to respond to the amendments in this order, dealing first with the amendments to Clauses 22 and 23, which are Amendments Nos. 6 to 10 on the Marshalled List.
	The noble Baroness's amendments to these clauses seek to secure that the code is non-statutory. However, I should like to point out to the House the consequences of adopting that approach. Amendment No. 10 would remove the Minister's obligation to lay a copy of the draft code of practice before Parliament and also remove Parliament's ability to scrutinise and approve the code of practice, taking away at one stroke the important protections provided in the Bill. Perhaps an unintended consequence of the amendment is that regulators would not have to have regard to a code of practice which Parliament itself had not had a chance properly to scrutinise, approve or think about.
	Amendments Nos. 6 to 8 replace the references to "a code of practice" with "guidance". In a sense that is cosmetic and would not have a profound legal effect. It is the effect of the guidance as set out in the Bill, rather than the title, which is important. The amendments as drafted do not remove the statutory duty on regulators to have regard to the code of practice.
	The provision in the Bill to issue a statutory code of practice derives from the current power in the 2001 Act. The House will be aware that in its report on the Bill the Delegated Powers and Regulatory Reform Committee stated that the power and the degree of scrutiny in issuing the code of practice were "appropriate".
	The power to issue a statutory code under the 2001 Act has to date not been exercised. It was thought that a voluntary code—the enforcement concordat—might bring about the necessary changes in the behaviour of regulators. However, the evidence analysed by the Hampton review suggests that there are still serious problems with variation and consistency with the application of this code, and that businesses are uncertain of regulatory requirements.
	The Government took that to heart when we consulted on the Bill. We asked whether the existing code of practice for regulators—the concordat—should apply on a statutory footing. Two responses were especially telling. The CBI that said it,
	"strongly believes that the Concordat should be placed on a statutory basis since current arrangements for voluntary compliance with the Concordat have not been effective".
	Similarly, the Federation of Small Businesses said:
	"If consistency of enforcement is to be achieved we see little alternative to a statutory requirement".
	For that reason, the Chancellor in the 2006 Budget announced that the Government intended to put on a statutory footing a code of practice for regulators and that that code would apply where a regulator determines its policies about the exercise of regulatory functions.
	Part 2 includes a provision to consult those affected by a code of practice, a duty for a Minister to lay a draft of the code before Parliament and for subsequent approval by both Houses before the code can be issued by the Minister.
	As I have already explained, Amendment No. 10 would remove the Minister's obligation to lay a copy of the draft code of practice before Parliament, and Parliament's ability to scrutinise and approve the code. I point out that the degree of scrutiny in the Bill for issuing a code of practice is more stringent than that contained in the 2001 Act. Issuing a code is subject to negative resolution under that Act; under the Bill, there will be an affirmative resolution.
	We have already published a draft of the code, a copy of which is available in the Library of the House, and the Government are working closely with regulators—including the Environment Agency, as I am sure the noble Baroness will be aware—and those regulated. The Government want to get this right. We want to work closely with the regulators and those regulated to achieve the right balance. The second draft of the code will be published later in the autumn and we will of course ensure that a copy is placed in the Library of the House. For those reasons, I urge that the amendments to Clauses 22 and 23 be not moved.
	Amendment No. 5 is intended to secure that the duty to have regard to the principles of good regulation in Clause 21(2) applies at the general level only, which is at the level where regulators determine their general policies or principles about how their regulatory functions, such as inspection or enforcement, should be exercised.
	The noble Baroness's rationale for that change is that because the Bill currently enables the duty to have regard to the principles to apply when regulators exercise individual level functions, such as inspecting a particular business, as well as to the exercise of general level regulatory functions, that might give rise to unintended consequences. I am well aware that legislation can sometimes have that effect but, in this instance, we disagree.
	The noble Baroness's concern, as set out in correspondence, is that the statutory duty to have regard to the principles will give grounds for regulated individuals to bring legal challenges against regulators—for example, by complaining that when inspecting the individual the regulator did not exercise its functions in a consistent or proportionate way and was therefore in breach of the duty. The fact that the duty to have regard to the principles can be applied to individual level functions does not mean that it will apply at the individual level in all cases, nor does it mean that that duty would, as a matter of course, give rise to vexatious litigation.
	For the benefit of the House, it is worth noting that the principles of good regulation in Clause 21 are not unprecedented in statute and can also be found in the Communications Act 2003, where the duty to have regard to them applies to both the general and individual level functions of Ofcom. Ofcom has informed Better Regulation Executive officials that the duty on it to have regard to these five principles does not cause problems in terms of vexatious litigation being brought against it in individual cases.
	Clause 24 enables a Minister to specify by order the regulatory functions to which the duties to have regard to the principles in Clause 21 and the code in Clause 22 apply. The order provides the flexibility for a Minister to list, or to choose not to list, specific functions of a regulator, whether these are individual or general level functions, depending on what is considered appropriate for that particular regulator, following consultation. As I am sure the noble Baroness will be aware, and Members of the House will generally acknowledge, regulators operate differently and carry out different types of functions in different contexts. Amending the Bill so that the duty to have regard to the principles can be applied only to general level functions would be to disregard the range and types of activities that regulators have. As the noble Baroness stated in her letter to me, regulators are, as a consequence,
	"many and varied, differing in size, legal status, geographic coverage, remit function and progress in delivering better regulation".
	The application of the principles at the individual level might be appropriate for one regulator—I refer again to Ofcom—but not for another. Although the principles will become statutory once the Bill becomes an Act and comes into force, the principles will have no real effect until an order is made listing the functions of a regulator to which the duty to have regard to the principles will apply. The order is subject to statutory consultation, and it will be accompanied by a regulatory impact assessment and debated in this House and in another place.
	Before making an order under Clause 24, the Government will seek the views of all those—the regulators and the regulated—who are affected bythe provisions of the proposed listing order. We will do this through formal written consultation, when appropriate, after the Bill receives Royal Assent. Having come so far, we must not prevent those who are regulated benefiting from Part 2. I have said that an impact assessment will accompany the order to be made under Clause 24, and that we will work alongside regulators and those regulated to ascertain the costs and benefits of applying to the regulators the duty to have regard to the principles. The Food Standards Agency has welcomed the opportunity to be involved once the Better Regulation Executive has started to develop the impact assessment on the order, and I hope that the noble Baroness will equally welcome this opportunity when the time comes. I reassure her and her colleagues in the other regulators that we will consider whether it is appropriate to list the individual-level functions of the Environment Agency, the Food Standards Agency, the Financial Services Authority and other comparable regulators from the scope to which the principles will apply.
	We understand exactly the point about vexatious litigants. We can pick it up as we work through the implementation of the legislation. I am extremely grateful to her for her supportive comments about the excellent intentions behind the legislation, and I think that we can deal with some of the issues as they arise through the implantation of guidance and codes. For all those reasons, I hope that the noble Baroness will feel able to withdraw her amendment.

Baroness Young of Old Scone: My Lords, I thank the Minister for replying so fully to my amendments, and the noble Lord, Lord Norton of Louth and the noble Baroness, Lady Harris, for their support for elements of them. I hope that the way in which my amendments were framed did not suggest that I was trying to reduce the scrutiny of this House to whatever is applied to a code or guidance. I still think that any guidance should be subject to consultation and scrutiny.
	On Amendments Nos. 6 to 10, the enforcement concordat set up by the previous Act had barely come into existence when Philip Hampton produced his admirable report, so it was a little rash of the Government to say that it was not working and probably a bit premature to declare it defunct before it had properly come to breath. I look forward to seeing the second draft of the code and the listing order. The Government are clearly placing a great reliance on the listing order to provide a differential approach to different regulatory functions in different regulators. I do not share their confidence. I think that we will be spending quite a long time on that order in this House. Thereafter, I believe that the only way in which we will be able to judge this part of the Bill will be by assessing the proof of the pudding in the eating and deciding whether, after some of these arrangements have been in place for a short or medium amount of time, they are contributing to better regulation or to vexatious litigation.
	As the Government show no signs of moving, despite the spontaneous uprising of support across the House for my amendment, I beg leave to withdraw the amendment.

Lord Bassam of Brighton: My Lords, I beg to move that this Bill do now pass. I thank the noble Lord and his Front Bench team—we had four or even five members of the Loyal Opposition performing at any given time. On reflection, while undoubtedly there was a time when the Bill generated controversy and hostility in another place, it was less the case here. That is because the Government were very careful in listening to the concerns of the regulators and regulated businesses, large and small. Their representations were very important to us.
	The Bill is in better shape now than it was previously. We look forward to a period of support from both opposition parties for the implementation of the legislation. It will have significance and will enable us to do things that I think we would all support to make it easier for businesses to grow, flourish and develop. It will provide us with a flexible, workable tool to make necessary changes to smooth the passage of business, local government, charities and those who provide goods and services in the United Kingdom.
	We have always maintained that this Bill is all about delivery, and the Better Regulation Executive and the Better Regulation Commission work well to advise and assist us in that.
	I thank the noble Lord, Lord Kingsland, and, in particular, the noble Baroness, Lady Wilcox, for her contributions on the Bill, as well as the noble Lords, Lord Howard of Rising, Lord Henley and Lord Goodhart. I also thank the Bill team, who advised us very skilfully during the passage of the legislation.
	Moved, That the Bill do now pass.—(Lord Bassam of Brighton.)

Lord Hodgson of Astley Abbotts: My Lords, when we first met in Grand Committee on this Bill on 30 January, after Second Reading on 11 January, it was the first of 13 Grand Committee sittings during which we discussed no fewer than 1,926 amendments, made a short 700 changes to the Bill and, along the way, caused the collapse of the traditional methodology used by the Public Bill Office for numbering amendments—another first for this Bill. I had no foreknowledge of the prescience of the remark that I made in that first Committee meeting. I said:
	"A journey of a thousand miles begins with a single amendment".—[Official Report, 30/1/06; col. GC 1.]
	If that was the right quotation for then, the appropriate one for today must be:
	"Once more unto the breach, dear friends".
	And what a breach it is: we have a Bill now with three volumes instead of two and 1,264 clauses instead of 885, and it still requires us to consider 1,029 amendments in a single sitting.
	I readily accept that in part the increase, and some 600 of the amendments, are as a result of the Government taking on board our advice on consolidation when the Bill first passed through this House. I thank the Minister for that and for his helpful letter of 30 October explaining the background. I also thank the Bill team for making that final push to transfer so many more clauses from previous Companies Acts into this one. The huge number of amendments with which we now have to deal as a result of this consolidation may be making these later stages of the Bill rather more unwieldy than is usual. The name change may have confused some people; nevertheless, history will show that the effort was worthwhile.
	As a final piece in the jigsaw, for which I am sure that this House will be grateful, perhaps the Minister could explain what will be left behind in the 1985, 1989 and 2004 Acts. What is planned to happen to those areas? When does he hope that we will finally complete the repeal of those three Acts?
	So much for what the Bill consists of: the next question worrying industry, commerce and practitioners is when it will all happen. The Minister's colleague in the other place, Margaret Hodge, sent us all a letter dated 16 August. She wrote:
	"In both Houses, Committee members examining the Company Law Reform Bill ... asked a number of questions about how the Bill will apply to existing companies. I intend to publish the enclosed paper this week, which sets out both our general approach to transitional issues and a possible timetable for commencement of the bill's provisions ... We have sought views on these issues by mid-September so that we are able to inform Parliament in October of the outcome at Report stage in the Commons.
	I should emphasise that this will be the first opportunity for interested parties to comment on transitional issues. We shall consult further formally on the full range of transitional arrangements after Royal Assent. We shall do this well before commencement of the bill's provisions. We hope it will be possible to commence the majority of the Bill's provisions on1 October 2007".
	At some time today, it would be helpful to the House and the country if the noble Lord could update us on progress on that proposal. To be specific: first, what has been the general reaction to consultation? Secondly, since inevitably much of this is an enabling Bill, when does he expect to publish draft regulations? Thirdly, and most importantly, are the Government still sticking to their implementation target of1 October 2007?
	Finally, and unfortunately, much as I would like to stand here and make a wholly positive speech, I regret that I have to say that despite the enormous number of constructive and very welcome amendments that we are considering today, there are some which quite frankly should not be there. After such a long consultation period with so many days in Committee both in this House and in another place, it is extraordinary that the Government have attempted at a very late stage to bounce through an amendment without proper scrutiny or debate. This would be regrettable but perhaps not serious if it was an issue on which there was a large measure of consensus, but that is not the case. The matter of reporting on the supply chain in the business review is a controversial issue that has sparked huge controversy and debate in the media over the past couple of weeks.
	At the opening meeting of the Grand Committee on 30 January, the Minister opened with some fairly disobliging remarks about my party and myself. He said:
	"Before I turn to the first amendment, I had hoped that we could debate this Bill on a relatively non-partisan basis. We all share a common objective of updating and modernising company law, and wherever possible deregulating. This Bill has been drafted on the basis of a great deal of expert advice and the widest possible consultation. Large sections of the Bill are highly technical. I had the hope that we could all work together to produce a Bill that provides the best possible conditions for the success of British industry ... I do not believe in politics-free politics, but I do believe that politicians should keep their attention firmly fixed on what is best for the economy and for the country".—[Official Report, 30/1/06; cols. GC 1-2.]
	I hope he will forgive me if I say that the way he and his colleagues have dealt with the supply chain matter runs counter to everything he said then.
	My honourable friends in the other place have had it far worse than we have. We at least have had two and a half weeks in which to consult interested parties before tabling amendments; our colleagues did not even have two and a half days. This Government have become renowned for their dismissive attitude towards Parliament and the principles of well considered and well written legislation. For this to be so clearly illustrated in such a flagrant way is extraordinary.
	It is hard to accept that having to consider 1,029 amendments in a single day will lead to a Bill which, in the Minister's words, will,
	"provide the best possible conditions for the success of British industry".—[Official Report, 23/5/06; col. 794.]
	This helter-skelter finish to our proceedings will, I fear, inevitably lead to unforeseen problems. The issues identified in the report from the Delegated Powers and Regulatory Reform Committee are probably only the beginning. The Government will have much to answer for. We on this side approach this final stage of the Bill as we have approached all the stages. We ask of each amendment: is it deregulatory, is it comprehensible, does it think small first, and does it provide the right balance between risk and reward to encourage men and women of the highest quality to work in British industry and commerce? We look forward to seeing how this latest set of amendments measures up to these yardsticks.

Lord Sainsbury of Turville: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 1 to 4. I shall speak also to Amendments Nos. 40, 45, 46, 49, 50 to 55, 57 to 59, 67, 69, 71 to 73, 79, 81 to 83, 108, 119, 175, 176, 209 to 211, 213, 215, 216, 218, 530, 531, 643 to 645, 758, 833 to 837, 839, 844, 846, 862 to 865, 867 to 870, 873, 874, 877, 878, 881 to 883, 885, 886, 889 to 893, 898, 900, 946, 953, 955, 956, 958, 969, 993, and 1018 to 1022. Before turning to the amendments before us, it may be useful if I say a few words about the amendments we will consider today, particularly in the light of the remarks of the noble Lord, Lord Hodgson; it would be appropriate. Clearly we are considering a lot of amendments. They cover 319 pages, which is surely a record, and the amendments themselves are lengthier than the Financial Services and Markets Act 2000. On the other hand, it has to be said that this Bill is not least a consolidation measure and is probably the largest Bill that has ever come to Parliament.
	It is important to remember the genesis of these amendments. The great bulk are due to the restatement exercise which was undertaken at the prompting of this House. It will mean that the Bill as amended will in effect be a complete code of company law. All the company law provisions of the 1985, 1989 and 2004 Acts have been brought into the Bill, other than the self-standing provisions on community enterprise companies and the provisions on investigations which go wider than in companies. This I feel sure makes the Bill very much more useful to practitioners and that, after all, has been the common aim of both sides of the House. We are grateful to parliamentary counsel for the considerable work involved over the few months since the Bill left this House, and to the Law Society in particular for carefully checking that the restatement does not make unintended changes to the law. Our intention in this exercise has been to restate the old law in more modern terms, but not to change its substantive effect except for two reasons: to ensure consistency with other provisions in the Bill and to ensure that we comply with our EC obligations.
	As we go through the amendments I will not try to list which ones are restatements as there are over 400 of them, but I can assure the House that parliamentary counsel will produce a full destination and derivations table so that practitioners can see exactly which these clauses are. Most of the remaining amendments we are considering today are indeed technical improvements suggested during the parliamentary passage through this House or another place, and many of them have come from professional bodies such as the Law Society and others, all of which were consulted in great detail before the Bill ever came to the House. It is not surprising that on further reflection and detailed scrutiny they have come up with further improvements, and I think it would have been utterly ridiculous for us to say to those professionals that where they raised points of detail which improved the Bill we would not accept them. On the contrary, we have taken a totally different approach because we think the value of this Bill lies in the fact that it provides a good framework for practitioners, lawyers, accountants and other professionals to conduct their business. We have therefore made it a matter of policy to give them the very greatest scrutiny and accept every amendment where it makes sense to do so. I am not in any way ashamed of having done that, nor do I think it is wrong. This is what this kind of Bill should be about.
	There is a small handful of contentious issues on which I expect we will have a lively debate today, but let us be clear that what we are talking about is some 13 amendments, a couple of which are government amendments. If we conduct our business in a sensible way, that is not too great a burden for this House. If we do not go over endlessly the many technical points, we should be able to tackle this within a reasonable time. That is against the background that there is now consensus on the Bill, which is very important for the competitiveness of the UK.
	My right honourable friend the Minister of State for Industry and the Regions said in another place that we would announce our timetable for implementation before the Bill completed its passage, and I am happy to take this opportunity to do so. We have, of course, discussed this important issue with business and others and recognise that we will need to allow some time after the necessary regulations are in place for the business community to gear up to using the new law. On this basis we intend to produce for consultation further details of how the Bill will be applied to existing companies by early next year. We will follow this with further consultation on other aspects.
	However, we will implement the provisions on company communications to shareholders and others in January 2007. This will include provisions facilitating electronic communication. We are doing this because, more than any other measure in the Bill, it will bring many millions of pounds of savings to business. It is the aspect of the Bill which business is most keen to see brought forward. I appreciate that many groups will have their own priorities for implementation. Unfortunately, we cannot accommodate all of those, but we thought it right to make an exception in the case of electronic communications because it will bring significant and tangible benefits very quickly.
	We will consult in February on our detailed implementation plans. Our intention is to commence all parts of the Bill by October 2008. We will continue to work with stakeholders in implementing the Bill. In particular, we will work with the business community to ensure widespread and effective communication of the Bill's provisions so that all parties fully understand the new provisions and are in a position to take advantage of the benefits.
	The noble Lord, Lord Hodgson, asked what was left behind in the 1985, 1989 and 2004 Acts. As I have explained, all the company law provisions of those Acts have been brought into the Bill, other than the self-standing provisions on community enterprise companies and the provisions on investigations which go wider than companies. The non-company-law parts of those Acts which will remain relate to some Scots law provisions, which are now devolved to and have been replaced by the Scottish Parliament; provisions about the Financial Reporting Council and the operation of that body and its subsidiaries, but not about how companies generally conduct themselves; and provisions about assisting overseas regulatory authorities in relation to the financial markets, the Financial Reporting Review Panel and insolvency, all of which relate more to financial services than to company law.
	Finally, I stand by the words that I used at the beginning of the Grand Committee—which, as I remember it, were provoked by a rather angry letter from the noble Lord to the Times to which I thought we should give careful consideration. I hope that in this debate, in which we have to consider 1,029 amendments, the same spirit will prevail as in many of our Committee sittings. We have only a limited number of contentious amendments to get through.
	The amendments in the first group are mainly technical. They have the effect of tidying up the drafting of the Bill, largely as a result of the restatement exercise. I therefore suggest that we do not spend a long time examining them. They make changes to the drafting where needed—for example, to amend references to the former Companies Act which are no longer needed as a result of restatement; to amend references to the name of the Bill, which is now the Companies Bill and not the Company Law Reform Bill; or to ensure the clarification of terms and a smoother reading of the Bill as a whole.
	Moved, That the House do agree with the Commons in their Amendments Nos. 1 to 4.—(Lord Sainsbury of Turville.)

On Question, Motion agreed to.

On Question, Motion agreed to.

On Question, Motion agreed to.

On Question, Motion agreed to.

On Question, Motion agreed to.

Lord Sainsbury of Turville: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 68. In speaking to this amendment I shall also speak to AmendmentsNos. 113 to 118, 120 to 155, 157, 159 to 170, 172 and 174. We now come to amendments to Part 10. This is clearly one of the most important parts of the Bill. The amendments to this part, agreed in another place, are relatively minor. I believe they also have cross-party support.
	I will look briefly at the main amendments, in amendment order. Amendments Nos. 68, 113, 115 and 118 ensure that a shadow director is treated as a director regarding potential liability for various offences, but not regarding their particulars being on the public record. Amendments Nos. 114, 116 and 117 to Clauses 150 and 152 ensure that the provisions for the protected record of directors' residential addresses are effective. Amendment No. 172 to Clause 226 provides powers to make regulations, providing greater protection for some directors' home addresses.
	Amendment No. 120 extends the provisions of Clause 167 to Northern Ireland. The effect of Clause 167 is to reverse the various relaxations to the strict no-conflict rule made by the Bill. Charitable companies will still be able to take advantage of the various relaxations, where their constitutions allow. That is the benefit of transparency. It will be clear from the charity's constitution whether it is able to take advantage of a relaxation to the strict no-conflict rule.
	Turning to the rules on substantial property transactions, Clause 176 implements a recommendation of the Law Commissions that has been widely welcomed, by allowing companies to enter into agreements that are conditional on the approval of the members of the company being obtained. Amendment No. 122 goes one step further by allowing the agreement to be conditional upon approval from the members of its holding company as well, in those cases where the approval of the members of the holding company is required. The amendment responds to concerns that companies could be inconvenienced if they had to wait for member approvals before they could agree to a substantial property transaction.
	The Bill makes a major deregulatory change to the regime applying to loans and other similar transactions by a company for its directors. At the moment these are prohibited unless certain exceptions apply. The Bill replaces that with a requirement for member approval. At the same time, the Bill was drafted to implement the recommendation of the Law Commissions that all the rules on loans, quasi-loans and credit transactions for directors should extend to all companies. For most private companies that would mean an increase in regulation, because at the moment many of the rules only apply to relevant companies. In broad terms, relevant companies are public companies and private companies that are on the same group as a public company. Although this recommendation was endorsed by the Company Law Review, we have carried out further informal discussions in light of the discussion in another place. There was clear support from stakeholders for the proposal that the requirement currently only applying to relevant companies should not be extended to all private companies. Under the amendments, the Bill would therefore no longer apply the rules on credit transactions or quasi-loans to private companies, unless they were associated with a public company, or apply the rules on loans, quasi-loans and credit transactions with persons connected to a director to private companies, unless they were associated with a public company.
	Amendments Nos. 135 and 136 make it possible for a loan under the exceptions in Clauses 189 and 190 to be used by a director to fund their defence in proceedings relating not just to the company but for negligence relating to associated companies. This recognises that in a group situation it may be more convenient for the loan to be made by a different group in the company.
	Companies legislation requires prior authorisation by the members for certain transactions; for example, loans or payments for loss of office between the company and a director. Section 66 of the Charities Act 1993 renders prior authorisation by the members for transactions such as payments for loss of office invalid unless the Charity Commissioners have given their prior written consent. That reflects concerns that in some cases the members of a charitable company are not independent of the directors, and that requiring their approval would not provide sufficient protection for the charity.
	Chapter 4 of Part 10 makes various changes to the provisions on the requirements for prior shareholder authorisation. Amendment No. 157 inserts two new sections into the Charities Act 1993, in place of Section 66 of that Act, to reflect the changes made by the Bill.
	I turn finally to the amendments relating to the indemnification of the director of a company acting as a trustee of an occupational pension scheme. The amendments address concerns raised in this House and in another place. The point was made that such directors perform a vital role, often for very little direct financial reward, and that directors' and officers' liability insurance policies currently available afford limited protection. We made clear that the Government attach great importance to the work of such directors, and that we are aware it can sometimes be difficult to recruit high-quality directors for companies acting as a trustee of an occupational pension scheme. In view of that, and following consultation with key stakeholders, we tabled amendments to permit companies to indemnify the directors of associated companies acting as trustees of occupational pension schemes.
	Moved, That the House do agree with the Commons in their Amendment No. 68.—(Lord Sainsbury of Turville.)

Lord Sainsbury of Turville: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 70. In speaking to that amendment, I shall also speak to AmendmentsNos. 315 to 512, 532 to 536, 560 to 612 and 646to 671.
	This group of amendments inserts a number of new clauses into the Bill. These restate various provisions, currently contained in Parts 4, 5 and 8 of the 1985 Act, which were brought into the Bill as part of the restatement exercise, and also replace and restate Clause 538 and Parts 18 and 19 in their entirety. The amendments in this group also insert new clauses into the Bill that contain powers to amend the restated provisions that are concerned with the maintenance of capital. I will come to that point shortly, but first I shall say something about the restatement exercise.
	The restatement of the 1985 Act provisions was foreshadowed by various debates that we had in this House. As I said at the beginning of today's debates, I reassure noble Lords that while the new clauses may, in some cases, look rather different in structure from those of the 1985 Act that they restate, our intention has been to make no substantive changes to the law, other than those that have been necessary in order to ensure compatibility with other provisions in the Bill and to ensure compatibility with EU law.
	The Bill as introduced included various provisions on share capital, which have been subsumed into the new clauses. The restated clauses have been made consistent with them. The new clauses inserted by Amendments Nos. 432, 512 and 671 contain three new powers. Those powers would enable the Secretary of State, in regulations made under the Bill, to amend respectively the rules on share capital, on purchase by a company of its own shares and on distributions. Together, those aspects of company law are commonly referred to as the "capital maintenance rules". There is some history to these proposals, and, as noble Lords will have seen, we now have the benefit of a report from the Select Committee on Delegated Powers and Regulatory Reform that comments on the proposals. The committee's recommendations always command the very greatest respect in this House when we are considering important and difficult issues.
	The House will recall that the Bill as it was originally introduced to the House contained a proposal for a general company law reform power. That proposal was dropped as a result of concern about the breadth of the power. We explained that there a small number of areas where changes were expected to be needed in the short to medium term, one of which was capital maintenance.
	It is important to understand the background. The capital maintenance rules are there to ensure that the company retains its subscribed capital as a protection for present and future creditors, and in particular to control the extent to which a company can give returns to its shareholders. Of course, profitable companies must be able to pay dividends to their shareholders. Indeed, this is a significant reason why we hold shares. But there must be rules to ensure that a company cannot pay money to its shareholders in a way that may jeopardise the legitimate interests of the creditors. As the Delegated Powers and Regulatory Reform Committee said, the rules are a mix of principles and very considerable detail. Much of our companies legislation dates back to Victorian times and the provisions are set out very largely in primary legislation, unlike, for example, the related area of financial services legislation where most of it is in secondary legislation. Part of the reason for retaining this approach in the present Bill is that business said to us that it wanted all the provisions together in one place.
	We have looked very carefully at the concerns of the committee and discussed these with others. We recognise that the powers would be very wide and that an exceptional case would be needed. The parts of the Bill that deal with share capital and with purchase of own shares are mostly concerned with preventing companies finding ways round the rules on dividends by passing value to their shareholders in other ways; for example, by buying back their own shares with company funds, or by unilaterally reducing their capital so that the test of whether their net assets are greater than their capital becomes easier to meet. It is very important to have these rules as otherwise companies in difficulty and in the hands of unscrupulous or imprudent directors and members could circumvent the dividends rule, enrich themselves and leave creditors worse off than they should have been. But essentially they are technical and are not of the same nature as the central rules on dividends.
	Experience shows that they can give rise to serious problems for companies that want to carry out entirely innocent transactions in circumstances where creditors are not at risk. As business practice changes, so these rules need to be adapted. There is a strong case that we need secondary powers to be able to do so. It is important for business that we have the powers in Amendments Nos. 432 and 512. We may well need to be able to make changes to meet legitimate needs. There is, therefore, a strong case for the powers in Amendments Nos. 432 and 512, even though I fully recognise that they are exceptional.
	Amendment No. 671 covers the area of distributions. The committee rightly cited Amendments Nos. 647 and 648 as being general rules of particular significance. The existing rules are based on the second Company Law Directive. These rules have existed in much the same form since 1981. There have been criticisms of them. Recently, with the introduction of international financial reporting standards, a number of companies have found that it was difficult for them to pay dividends under these rules, even though they were profitable under UK generally accepted accounting principles (UK GAAP). A number of people have expressed concern about these rules on dividends, but there is as yet no consensus on how these should be improved. We are following with interest companies' experience with IFRS. One of the purposes of AmendmentNo. 671 was to enable us to amend rules if a generally acceptable improvement in the dividend rules was agreed. However, we recognise that significant aspects have not been debated. We are very mindful of the important considerations to which the Delegated Powers and Regulatory Reform Committee has drawn attention. Having considered the report of the committee, we have reached the view that it would be going too far and is not necessary to take a power to change the basic rules on dividends. We accept that if we decide to change these rules, we shall need to come back to Parliament with primary legislation unless other powers such as the European Communities Act are available. I have therefore indicated that I will recommend that we oppose Commons Amendment No. 671.
	By asking the House to agree with Commons Amendments Nos. 432 and 512 but to disagree with Commons Amendment No. 671, we believe that we have found a way to meet the concerns of the Delegated Powers and Regulatory Reform Committee while enabling us to bring clarity to some important aspects of company law in a reasonable time frame.
	A small number of the amendments in this group make technical changes to the Bill's provisions on capital maintenance and share capital. I do not propose to say much about these, save to reiterate that these changes have been necessary to ensure compatibility with EU law and other provisions in the Bill Other amendments in this group take forward commitments we gave in another place: in particular, they enable the minimum share capital requirement for public companies to be satisfied in euro as well as sterling and clarify that the prohibition on public companies and their subsidiaries providing financial assistance for a purchase of own shares does not apply to the foreign subsidiaries of such companies.
	Before I sit down, I mention an issue raised by the Law Society, which may have been drawn to the attention of noble Lords. There is a concern that, following the abolition of the prohibition on private companies giving financial assistance for a purchase of own shares, a private company might not be able to enter into the range of transactions that are currently permitted—that is, if it has availed itself of the current exemption for private companies commonly known as the "whitewash" procedure. Noble Lords may wonder how the removal of the prohibition on giving financial assistance could be seen to be more restrictive than the current exemptions.
	The issue is that some interested parties—the Law Society included—consider that the "whitewash" procedure provides a statutory code that supplants the common law rules on the maintenance of capital. That being the case, there is a further issue as to the extent to which, if at all, the repeal of these provisions would resurrect the common law. The extent to which the current exemptions supplanted the common law is far from clear, but in any event, in our view, the repeal of the "whitewash" procedure does not resurrect the common law. In short, if there is a problem with the common law—we are not aware that there is—this already exists. None the less, we intend to put this matter beyond doubt by making it clear, in a saving provision made under Clause 921, that the removal of the prohibition on private companies giving financial assistance for a purchase of own shares will not prevent private companies entering into transactions which they can lawfully enter into now—that is, under the "whitewash" procedure. We have discussed this approach with the Law Society and trust that this addresses its concerns.
	Moved, That the House do agree with the Commons in their Amendment No. 70.—(Lord Sainsbury of Turville.)

Lord Sainsbury of Turville: My Lords, I beg to move that House do agree with the Commons in their Amendments Nos. 71 to 79.

Lord Sainsbury of Turville: My Lords, I am grateful to the noble Lord, Lord Hodgson, for tabling his amendments, because they give us an opportunity to discuss Amendments Nos. 105 and 106 in more detail. The new clause introduced by AmendmentNo. 105 gives the member the right to split his holding and exercise rights attaching to shares in different ways. This is to accommodate members who hold shares on behalf of more than one person, each of whom may want to exercise rights attaching to those shares in a different way. For example, the member could, on behalf of those for whom he is holding shares, put 50 per cent of his shareholding towards a requisitioning resolution.
	The new clause introduced by Amendment No. 106 deals with four situations where the shareholder threshold required to trigger a right is 100 shareholders holding £100 each on average of paid-up capital. The clause allows indirect investors to count towards the total provided certain conditions are met. The condition is intended to ensure that only genuine indirect investors are allowed to count towards the total, but the same shares cannot be used twice, and that an indirect investor can use the procedure only if his contractual arrangements with the member allow the former to give voting instructions. The effect of the noble Lord's amendments would be to limit the types of company to which these two new clauses apply. This goes entirely against the principle of facilitating the exercise of shareholders' rights on behalf of others. We understand the concern that some private companies may have shareholder agreements containing provisions that are not consistent with the provisions of Amendment No. 105, but the clause applies to statutory rights and the rights attached to shares by the terms of allotment or the articles. Rights under shareholders agreements should not be affected, because they would not be transferred with the shares as a matter of law.
	It has also been represented to us that some private companies' articles provide for pre-emption rights to operate on an all-or-nothing basis. When the company wants to issue new shares, it will offer the shares to existing members in proportion to their shareholding. The articles would stop a member taking just some of the shares. We agree that Amendment No. 105 would cut across articles like this where the member holds shares on behalf of more than one person. However, that is not sufficient ground for exempting private companies from the general requirement.
	After fully reconsidering the policy in this area over the summer we want to go as far as we can towards recognising the rights of underlying shareholders. Unless the potential cost burdens are prohibitive, and we do not think that they are in this case, we do not see why a right that is available in relation to public companies should not be available in relation to private companies as well. After all, some companies that are taken as private are left with a number of nominee shareholders that hold shares on behalf of others. It is also possible, although rare, to have a private company that is quoted.
	For that reason, we cannot agree to the noble Lord's amendment, but I hope that he realises that we have considered this matter thoroughly and have given it the attention that he was looking for. I hope that he will not press his amendment.

Lord Sainsbury of Turville: My Lords, I beg to move that the House do agree with the Commons in their Amendment Nos. 156.
	In moving the Motion, I shall speak also to Amendments Nos. 171, 173, 192 to 199, 202 to 204, 208, 214, 248 and 309. These amendments are designed to help improve the operation of the resolutions and meetings provisions in Part 13 and related provisions. Some of the amendments result from queries raised by the Opposition in another place, and we are grateful to the Law Society for the issues that it has raised. Other amendments arise from parliamentary counsel's work to make the drafting of the Bill more consistent. I shall outline what these amendments achieve.
	Amendment No. 192 to Clause 264, along with Amendments Nos. 156, 171, 173 214 and 309 to Clauses 208, 222, 230, 350 and 526, makes the drafting relating to requirements for a decision to be "by resolution" or "by ordinary resolution" consistent throughout the Bill. Where a resolution is required, but the type of resolution is not specified, the default will be an ordinary resolution unless the articles require a higher majority.
	When a provision specifies that an ordinary resolution is required, the articles will not be able to specify a higher majority. That will apply in cases where, for example, we do not want the will of a simple majority to be frustrated by a blocking minority. This is especially important in the case of provisions, for example, to remove a director or an auditor.
	Government Amendments Nos. 193 and 194 respond to concerns raised in another place about the admissibility of votes. The amendments replace Clause 270 with a new clause to preserve the right for a company to require objections to votes to be made in accordance with procedures in their articles. We took the point that the old clause was too ambitious, so we are just preserving the current law. If an objection is overruled, the decision will be final, except in cases of fraud and certain other kinds of misconduct detailed in the case law where a court may intervene.
	The amendments are about, on the one hand, certainty for the company by enabling the chairman to settle matters relating to the admissibility of votes in accordance with the articles and, on the other, sufficient remedies for members to challenge a decision if it was not reached properly. I think that we have now achieved the right balance.
	Government Amendment No. 195 to Clause 286 is a minor amendment to tidy up the drafting of provisions about member requests for general meetings, resolutions and so on. They make the drafting consistent throughout the Bill.
	Government Amendment 196 to Clause 288 relates to a situation where a company fails to hold a general meeting in response to a member request. It makes sure that the cost of the meeting can be recouped from the directors, whether they are engaged directly or via a service company.
	Government amendments to Clause 290 improve the drafting by clarifying how AGMs can be called on short notice. Government Amendments Nos. 199, 202 and 203 to Clauses 297, 321 and 325 add a cross-reference to ensure that companies are aware of their potential obligations under Part 9. Amendment No. 204 to Clause 333 corrects a drafting error.
	Amendment No. 208 inserts a new clause to ensure clarity and consistency in the calculation of time periods in relation to meetings and resolutions. It responds to concerns raised in another place about whether, in calculating periods of notice, the date of the notice and the date of the meeting are supposed to be excluded. Amendment No. 248 to Clause 406 is a drafting improvement on a similar point.
	Moved, That that the House do agree with the Commons in their Amendment Nos. 156.—(Lord Sainsbury of Turville.)

Lord McKenzie of Luton: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 212.
	The funding of political parties is important and rightly concerns noble Lords on both sides of the House. The company law interest in this area arises from the possibility that a director might put his personal interests or those of a political organisation ahead of the interests of the company. In other words, a director might have a conflict of interest when making a political donation or incurring political expenditure. These provisions, therefore, have an important but limited purpose. Company law would of course not be an appropriate vehicle for delivering wider policy objectives in relation to political funding.
	Clause 353 provides that a trade union is not a political organisation for the purposes of Part 14. This means that funding from a company for a trade union, such as the provision of a meeting room or use of a company car, cannot be considered as a political donation requiring the authorisation of the company's shareholders.
	However, concern was expressed in another place that this provision might allow companies to circumvent the Bill's requirements for authorisation by making donations to the political fund of a trade union in the expectation that the trade union would make a donation to a political party. In response to those concerns we propose to replace Clause 353 with a new clause that would require shareholder authorisation of donations made to the political fund of a trade union, but not of other donations made to the union. This will prevent companies circumventing the controls of the Bill.
	There is no danger of donations other than to a political fund being redirected to political parties, because the Trade Union and Labour Relations (Consolidation) Act 1992 prevents trade unions making payments to political parties, except through their political fund. That Act also prohibits trade unions from redirecting money received from third parties into the political fund unless the money is given as a contribution to the political fund. I should make clear that we are not aware of any companies making donations to trade unions as a means of circumventing requirements applicable to political donations in that way. This amendment will ensure that it is not even a possibility in the future.
	Amendments Nos. 219 to 223 address an issue that was raised in another place. Under Clause 353, the directors of both a subsidiary company and of its "relevant holding company" may be liable if an unauthorised donation is made by a subsidiary. Clause 354 recognises the possibility that neither the holding company nor the subsidiary itself may bring an action against the directors who are liable in respect of the unauthorised donation. It therefore allows shareholders to bring legal proceedings to enforce that liability. In such cases, we agree that both shareholders of the subsidiary and shareholders of the holding company should be able to bring proceedings. This is particularly important if the directors of the holding company are effectively the shareholders of the subsidiary; for example, if it is a wholly-owned subsidiary.
	The clause as currently drafted would allow only shareholders of the subsidiary to bring proceedings, even against directors of the holding company. As I explained, we do not think that this will work in practice. These amendments address the problem and give the right to bring these proceedings to shareholders both of the subsidiary and of the holding company. This will ensure that directors of holding companies can be held to account by their shareholders if they use subsidiaries that they control to make unauthorised donations.
	Amendments Nos. 212 and 217 make minor drafting amendments to Clauses 348 and 352. These amendments are consequential on AmendmentNo. 918, which inserts a new clause providing definitions of "subsidiary" and "holding company".
	Amendments Nos. 226 and 227 provide greater clarity, and we are grateful to the Opposition for suggesting those changes.
	Moved, That the House do agree with the Commons in their Amendment No. 212.—(Lord McKenzie of Luton.)

Lord Sainsbury of Turville: My Lords, we come to Amendment No. 245 and the other amendments in this group—Amendments Nos. 245A, 245B, 245C, 245B and 246—on the business review, on which there has recently been much press coverage. In my view, this issue has not been debated with quite the degree of clarity for which one might have hoped. It is right therefore that this House should be able to debate the issue. I am also glad of the opportunity to provide further clarification about the Government's intent and about the revised amendment that we now propose in its place.
	Let me remind noble Lords of our policy and overall aims. The Government are committed to improving both company reporting and transparency. We believe that one of the most important ways in which directors will be accountable is through improved corporate reporting. It is important to stress that we have made great progress to bring together commercial success with sustainability in the Bill. The business review goes hand in hand with directors' duties and is key to encouraging directors to provide meaningful, forward-looking information for shareholders, without imposing disproportionate burdens on business. On Report in another place, the Government introduced Amendment No. 245A to Clause 399, to require quoted companies to disclose information on contractual and other arrangements essential to the business. The Government now propose to elaborate on the new provision in order to ensure that such information cannot be misused by animal rights extremists. That is the purpose of Amendment No. 245B.
	Some may accuse us of watering down the amendment that we originally tabled in another place, which is not the case at all. Clearly, we do not want the new requirement to disclose information on contractual and other arrangements to be exploited by animal rights extremists. But it is also important that narrative reporting from business is meaningful and shows the risks as well as the opportunities facing a company. The revised amendment strengthens the provisions by allowing directors to omit information about a person if, in the directors' view, it would be,
	"seriously prejudicial to that person and contrary to the public interest".
	We believe that that is the right way forward.
	Let me explain how we arrived at that point. Throughout the passage of the Bill, Ministers have continued to consult and listen carefully to representations from all parties. We tabled amendments to the Bill in another place to reflect business views on the position of company secretaries, the liability regime, and a raft of technical amendments suggested by business groups. As regards the business review, a number of interests were also lobbying consistently to strengthen the provisions for a higher level of audit requirement and for reporting standards with statutory backing—we will be debating that again when we come to the amendment tabled by the noble Lord, Lord Razzall. They were also lobbying to extend the explicit requirements for quoted companies to all large and medium-sized companies, to remove exemptions for medium-sized companies from reporting non-financial key performance indicators and to disclose information on the supply chain.
	Adding an explicit requirement for quoted companies to report information on contractual and other arrangements essential to the business is one change that we believe will add value to the quality of the reporting without imposing disproportionate or onerous burdens on business. That is entirely in line with the Government's key agenda on better regulation and sustainability.
	Let me provide some clarity on what the Government expect to be reported in the business review. This is not a requirement on companies to list their suppliers and customers, or to provide detail about contracts. The provision is about reporting significant relationships, such as with major suppliers or key customers critical to the business, which are likely to influence, directly or indirectly, the performance of the business and its value. It is for the directors to exercise judgment on what is necessary to report. They need only include information to the extent necessary for an understanding of the development, performance or position of the business.
	Let me illustrate that with some simple examples. Where a company provides the vast majority of its products or services to one customer, the arrangements might well be essential and therefore disclosable, particularly if the company could not be sure of finding an alternative buyer for its product. Similarly, where a company relies on a single supplier for a key component, so that, if that supplier went bust, that would have a serious impact on the company's business, then that too would be disclosable. But where a company is buying products or services from a number of suppliers, or could switch suppliers, then it is much less likely that it would be necessary to disclose details of a particular supplier to give an understanding of the development, performance or position of the business. Similarly, if a company has a wide market of customers, then the directors might judge it unnecessary to disclose information about any particular customer.
	Some have complained at the disproportionate burdens that this provision imposes on companies. We disagree. The provision is identical to a similar one in the original OFR legislation, which was discussed widely at the time. As I said, this is about reporting key relationships—for example, with customers, suppliers, key employees and regulators for companies in regulated sectors—not exhaustive lists. The cost implications are minimal, based on cost estimates provided by the CBI and others at an earlier stage.
	Furthermore, when my right honourable friend the Minister for Industry and the Regions and I met representatives of the CBI and other business organisations on Monday and Tuesday this week, they were reassured that this requirement was not about imposing big reporting burdens on companies. As Miles Templeman, director-general of the Institute of Directors, was quoted in the Financial Times the next day as saying:
	"We've now had a period of consultation which we weren't able to have before this clause. We believe that the intent is not to bring out a whole new raft of bureaucratic work and regulatory burden".
	While business groups were seeking clarity behind the Government's intent, they were very certain that they did not want statutory standards. However, there were concerns about animal rights extremists.
	The intention behind the revised government Amendments Nos. 245A and 245B is to deal with legitimate concerns over animal rights terrorism, although the amendments are not confined to that and could deal with other similar cases. The concern was that, if a quoted company engaged in animal testing disclosed, for example, who its key customers or suppliers were, that could seriously prejudice the interests of those customers or suppliers, who could then be targeted by animal rights activists.
	That is why the Government's amendment is framed in the way that it is—to exempt directors from disclosing information about a person if disclosure would, in their opinion, be seriously prejudicial to the interests of that person. Disclosure must also be contrary to the public interest. The intention of the requirement is to ensure that the exclusion is not used to cover up wrongdoing on the part of suppliers. For example, if a supplier supplies dangerous goods and may be negligent in doing so, it is clearly not in the public interest to conceal his identity.
	We are not seeking to exempt the directors from reporting information that would be prejudicial merely to the company. Our view is that that would create an unjustifiable let-out and that it is not necessary to do so to ensure that the interests that we are concerned to protect are covered.
	We have considered a number of scenarios. If a contract with company B is essential to company A and there is a clear risk that company B will be unable to continue to meet its obligation, we think it right for the shareholders of company A to be made aware of the risk, whether that risk is from animal rights extremism or otherwise. However, in most cases, there will be no reason to explain why the risk arose. It is the effect on the reporting company that is important. If it were necessary to disclose, then it would almost certainly be prejudicial to the supplier.
	We are also conscious that it could be damaging to a reporting company if it were known that it was in a relationship with a company engaged in animal testing. In very many cases, that will not need to be disclosed as it will not be essential to the reporting company's business. But if it were essential, we think that the prejudice would be not only to the reporting company but to the other company, because it would lose the business if the reporting company had to withdraw. Alternatively, the threat might be that the other company would be boycotted if it continued in the relationship. Again, that would prejudice the other company. In effect, it would force the other company to choose between the reporting company and its other customers.
	Therefore, after considering the matter carefully, we believe that all the cases that we want to cover are covered by an exclusion for prejudice to persons other than the reporting company. As I said, we believe that an exclusion for prejudice to the reporting company itself would go too far and enable things which should be properly disclosed to be concealed.
	Moved, That the House do disagree with the Commons in their Amendment No. 245, but do propose Amendments Nos. 245A and 245B in lieu.—(Lord Sainsbury of Turville.)

Baroness Noakes: My Lords, we could see no reason for the haste to put this amendment into the Bill in the dying days of its consideration in another place. During the Bill's passage through your Lordships' House, we inserted Clause 452, which gives the Government power to amend financial reporting requirements by order—an entirely sensible power that could have been used with a more seemly timetable and could have allowed for proper consultation and focused discussion.
	Noble Lords will be aware that many voices in the business community have urged us to delete Amendment No. 245. Instead, we have sought to work constructively with them to achieve an amendment which does least harm to the businesses that it will affect. The Minister explained the nature of reporting only contractual or other arrangements that are essential, and of course a disclosure is required only if it is necessary for an understanding of the business.
	The Government's Back Benches in another place, and indeed the lobby groups, might like to reflect on whether these words will require any disclosure at all by the highly complex and diverse businesses found at the top end of the FTSE. The Minister himself made the case that it is very unlikely that significant, or any, amounts will be disclosed by such businesses in the FTSE—for example, Sainsbury's, Tesco and HSBC. It is extremely unlikely that essential contracts will be necessary for an understanding of the business. Although it is very unlikely that these large companies will end up reporting nothing, that does not mean that the amendment is benign, because it is very likely to affect the smaller quoted companies, of which there are up to 2,000.
	One problem with the amendment that has been pointed out by the Stock Exchange, the Quoted Companies Alliance and the CBI is that every company will have to go through the process of considering what it has to disclose, and for many that will be an onerous task. However, the real burden will be borne not by the companies in the FTSE that have large departments that deal with this sort of thing, but by the smaller quoted companies which are less diverse and may well have essential contracts that need to be disclosed for them. The Government have talked a lot about easing the regulatory burdens on business, and they made that one of their themes for the Bill. But with Amendment No. 245, they have in practice loaded the burdens on to the quoted companies least able to bear them.
	The danger lies not in the administrative costs that will be borne and in the diversion from running the business that will occur but in the fact that some information could cause harm. The Minister referred to animal rights activists, but I do not think that we have to stop there. Perhaps one needs only to think about anti-nuclear protestors if the Government give the go-ahead for new nuclear build. If one looks across the Atlantic, one can see violent, unlawful protest against, for example, abortion clinics. God forbid that that would ever come to this country but it is not beyond the bounds of possibility. It is extremely important that we get any amendment right here.
	We congratulate the Minister on AmendmentNo. 245B, in that it would allow non-disclosure where it would be seriously prejudicial to the interests of the other party to the contractual arrangements. We completely agree with that. But my AmendmentNo. 245C goes on to deal with two further issues.
	First, it would allow non-disclosure if it were seriously prejudicial to the company. The Minister will be aware that the CBI has expressed continuing concerns about this aspect of the Government's own amendment. He sought to argue that the main problems would always be borne by the company on the other side of the contractual arrangements, but I do not believe that that would always be the case. For example, a quoted company could deal with an unquoted company which the animal rights activists know all about, but they might not know that it is dealing with a quoted company until the disclosure is forced—perhaps because there is one essential contract. The Minister's amendment would give no comfort to those companies, which would have to reveal the first time that they were dealing with a company, such as Huntingdon Life Sciences, which was itself unquoted.
	The Minister has confined himself to trying to deal with the issue of animal rights activists and similar. Commercial considerations must also be protected. If, for example, a company has an essential supply contract with another company, revealing that could well reveal the source of that company's competitive advantage, which would thereby give commercial information to its competitors and possibly to its foreign competitors. The amendment gives no protection to that kind of company.
	The Minister has pointed out that his amendment also allows nondisclosure only if the second test of public interest is met. I am not sure that it is reasonable to expect directors to weigh public interest in deciding whether to disclose. I can think of no other instance in company reporting that is qualified in this way. It is far from clear what public interest means in this context and perhaps the amendment tabled by the noble Lord, Lord Razzall, becomes more important as regards understanding the words in these amendments. It is not clear whether public interest applies only where potential criminal activity is involved or whether it could also apply where there was some commercial interest and, if so, whether that could be calibrated only at the level of UK plc or whether there is some public interest in the commercial health of other companies. It is very unclear. The Minister has offered some explanation, but I do not think it has gone far enough to give a clear understanding of what is involved to anyone in the reporting community.
	My amendment leaves the public interest wording there. I do not know what it means but it is there as an alternative and not as an essential test. Through my amendment, I do not wish to open the doorway to those who unlawfully wish to disregard the legitimate disclosure requirements that the Government now wish to create. However, we need to weigh in the balance the very real need to protect British companies against possibly harmful effects from disclosure and against the benefits that others certainly see. It is not clear-cut and it is a balance.
	Moved, as an amendment to AmendmentNo. 245B in lieu, Amendment No. 245C.—(Baroness Noakes.)

Lord Patten: My Lords, I believe that the noble Lord's colleague in the House of Commons was very firmly bounced by NGOs and others into making these provisions. It was not something that the Government had toyed with bringing forward until the lobbying gained apace at a later stage. My point about legislative fatigue is the way in which the Government rolled over to the lobbying and that is why I think the DTI has shown a certain amount of mettle fatigue as well. That is doubtless why the Secretary of State for Trade and Industry, in his appearance in another place before the Select Committee on Trade and Industry on 24 October, stalwartly refused to give any undertaking at all that he thought that the department had a long-term life in front of it.
	My second point is in strong support of what my noble friend said about the effect of these provisions on smaller companies with just one, two or three suppliers. I believe that this will be a very onerous burden. She has set the point out very clearly and I shall not attempt to be a little Lord Echo to what she has said so forcefully.
	Thirdly, I believe that we should all be aware of legislative creep, of regulatory creep and of compliance creep in this legislation. My noble friend on the Front Bench said that big companies can handle the extra regulatory box-ticking through which they will have to go, but, I predict that a whole new industry will emerge and companies will have to be very stalwart in resisting it in order to give gainful employment to professional services, firms and others, coming forward with seminars, breakfast meetings and new undertakings that they feel companies should fulfil. I think that some companies, innocent though they may sometimes be, will fall for this. We will see a great deal more regulation, self-imposed by companies, thanks to compliance creep urged forward by professional services firms.
	I do not believe that the purposes of industry, business and commerce have been particularly well served in respect of these provisions by the CBI and, in particular, by the Institute of Directors. The words of Mr Templeman, the director-general of the Institute of Directors, which have already been quoted in your Lordships' House, will come back to haunt him in future years after having had a cup of tea with Mrs Hodge, who told him that everything was going to be all right. She does not have that effect on me, my Lords.

Baroness Northover: My Lords, as the Minister will remember, there was considerable discussion of the role of companies in the developing world when the Bill went through your Lordships' House, and those issues were picked up in the Commons. I give a guarded welcome to the Government's Amendment No. 245A, which acknowledges that there are issues relating to labour standards and environmental, social and human rights impacts down companies' supply chains which need to be addressed. However, the amendment is still pretty weak; it does not go as far as the OFR, which the DTI had proposed and the industry had accepted but which the Chancellor then knocked out last year. As the Minister emphasised, under the amendment it will remain the directors' judgment of what is relevant in the supply chain for them to report on. It will not require companies to list their suppliers. It also affects a limited number of suppliers, so it is a limited amendment.
	On Amendment No. 245B, I would like to know more about the circumstances in which directors could withhold information. I would not want this to be Trojan horse in the middle of the legislation.
	I believe that Amendment No. 245C should be opposed. It is significantly weaker than the Government's amendment and would undermine the provision of information to shareholders about risks down company supply chains. Meanwhile, the amendment of my noble friend Lord Razzall would ensure a much more independent framework for the Government's proposals. It would mean, for example, that companies could be compared across years or between themselves; less would depend on the judgment of the directors and more on outside standards, which is vital. It should help companies see what they need to do, as the noble Baroness pointed out.
	It strikes me as ironic that this week, with enormous acclaim, the Stern report was launched in the presence of the Prime Minister and the Chancellor. All agree that there has to be a sea change, as it were, in public, government and international thinking about what we are doing to our planet, how the poorest countries in particular will cope and what the consequences will be for all of us. Yet when I look at these very limited proposals, there seems to be a gulf between what is here and what the Government said earlier in the week.
	This is an opportunity, and it surely should not be missed. Responsible British companies are rightly proud of what they contribute in developing countries. Why should we not now ensure that others, too, meet those standards and that their presence in developing countries, as represented down their supply chain, has the beneficial effects we all wish to see rather than negative effects?
	I disagree strongly with the noble Baroness, Lady Noakes, that we should not rush into things in the dying days of the Bill. These issues have been debated throughout our proceedings. This is a rare opportunity; this massive Bill has been a very long time in coming, and we should do what we can now. I therefore commend Amendment No. 245D and point out to the Government that there is still a long way to go, to judge by their proposals.

The Lord Bishop of Winchester: My Lords, I regret that I clearly misunderstood the noble Lord, although I said what I thought I had heard him say.
	What we have here is essential. It is of great importance that business management and company decision-makers not only gather information to understand and improve the impacts of their operation in all the fields in which they work but that their thinking and decision-making, and the evidence on which they make their judgments should be available to those whose proper responsibility it is to scrutinise those decisions in company reports and similar places.
	The effect of the amendment should be—and this is my concern about Amendment No. 245B and still more about Amendment No. 245C—that shareholders and others will have access to the important information about impacts and risks down the supply chains of the companies they invest in. It is most important that this kind of reporting is not an option—not something that directors should have regard to but which is required of them.
	Since supply chain management is essentially about relationships, it is important that the reporting in a business review demonstrates that companies hear and respond to their suppliers' perspectives. It is especially important—granted it is my own sense—that a responsible company is one which really takes as much interest in, for instance, the health and safety questions that surround its operations in countries outside the legislative framework of this provision, as it is by law bound to do in relation to its operations of this company. I think, for instance, of the range of operations carried out by UK and international companies in conflict or post-conflict countries like the Democratic Republic of Congo.
	It is of enormous importance that UK companies should be transparent and give their shareholders and others an opportunity to understand the character of their operations in such countries. That is especially important when—not just in my judgment but in the judgment of the All-Party Parliamentary Group on the Great Lakes Region and Genocide Prevention, of which I am a member, and of other organisations such as RAID—the Government are slow on the vital question of strengthening the activities of the UK contact point under the OECD guidelines. It is of great importance that the public interest, for instance, includes that kind of a public interest. That is why I am glad those words are in Amendment No. 245B. But I do not want them to be whittled away. So, as regards Amendment No. 245, it is most important that this provision should be in the Bill.
	I am concerned, as was the noble Baroness, about the implications of Amendment No. 245B and some of the first line of Amendment No. 245A. I want to be assured that that is not—as the noble Baroness asked—a Trojan horse. I do not want that to be a weakening of the provision—and it is important that it should not be. I share the noble Baroness's concerns about Amendment No. 245C, which I also wish to oppose. I welcome Amendment No. 245D because it would give the opportunity to set out a proper framework within which this reporting should take place. I am grateful to the noble Lord, Lord Razzall, for tabling it.
	In conclusion, it seemed to me that perhaps I or one of my colleagues ought to have a conversation with the noble Lord in order to add to his bank of biblical quotations because we have heard the same one twice today.

Lord Judd: My Lords, I have spent most of my professional life dealing with the frontline issues of the Third World and deprived parts of the global community, and it is good to see the Government, having listened to argument, move in response to it. The Government often get criticised for not listening to informed argument. On this occasion they have. I agree, I must say, with the Liberal Democrat Benches that would have been good to see them move further, but they have moved positively and they should be commended for that.
	I make just one observation. This is not just about social responsibility in the way in which we normally think about it. Having been involved in the front line with social issues in the Third World, I know that that has a great deal to do with world security. The amount of animosity and alienation that derives from irresponsible business behaviour should not be underestimated. It can have a very detrimental effect on global security and play into the hands of extremists. On those grounds, as well, what the Government have been able to do needs to be strongly supported. In the spirit of goodwill and support which the Government are enjoying from so many people, I urge my noble friend seriously to consider the Liberal amendment which, it seems to me, puts a bit more beef into the methodology that will be available to fulfil the purpose.

Lord Young of Norwood Green: My Lords, I support the government amendments and oppose Amendment No. 245C. I must declare an interest. I am the vice-chair of the Ethical Trading Initiative, but today I am speaking in a personal capacity. I welcome the government amendments as an acknowledgement that there are issues of labour standards, environmental, social and human rights that impact down company supply chains. I listened with interest to those who have expressed concern about that. In their annual reports, most companies declare themselves committed to corporate social responsibility. I welcome that. Of course, they should be judged by the level of commitment that they apply in practice. It is interesting that some companies declare quite a surprising amount of detail about their supply chain. Somehow they manage to survive the competitive risk.
	It is a well known fact that in the global environment in which companies operate today, many of them share the same suppliers. They may not publicly admit that, but they do. I commend those who have said that what the Government are doing is a worthwhile but modest step in the right direction. I do not share the foreboding of Cassandra, alias the noble Lord, Lord Patten, on the terrible effects that the provision may have. It is important to note that this is a modest amendment. All it does is require 1,300 quoted companies to do what responsible companies were doing in the 1990s. According to the Minister's statement on Report, it will remain the directors' judgment what is relevant in the supply chain for them to report on and will not require companies to list their suppliers.
	Some NGOs were calling for the Government to go a lot further. Like many others, I do not see anything wrong with that. I am struggling to get my head round a scenario where the Institute of Directors and the CBI and not being effective in their lobbying. Some of my trade union colleagues would say that they are far too effective. I leave the House to judge where the balance of evidence lies on that front. I cannot believe that they do not have the ear of the Government.
	NGOs were calling for the Government to go a lot further in strengthening the rules in the Bill on companies' social and environmental impact, including stronger reporting requirements—several noble Lords, including the right reverend Prelate, referred to that—and a positive duty on directors to minimise negative impacts. Personally, I do not see a problem with allowing directors to withhold information that might put individuals at risk to their privacy, safety or security from threats by animal rights or other extremist organisations. That is not a theoretical threat or risk; we know that it exists and I welcome the Government for acknowledging that.
	However, I would welcome clarification about the circumstances where directors could legitimately withhold information about suppliers and examples of where that would be seriously prejudicial to a person or contrary to the public interest. I would welcome the Minister expanding on that. He gave some clarification, but it is important that that does not become a get-out clause. In particular, I am concerned that the amendment will be open to abuse by directors who want to withhold information about supply issues that should be in the public domain, as other noble Lords have said. I should like reassurance from the Government that the drafting of the provision does not leave it open to abuse in that way.
	Also, I believe that the amendment could be improved by introducing a "comply or explain" principle, as under the combined code on corporate governance: that is, requiring directors to make a statement in their business review indicating that information about suppliers has been withheld under that provision.
	I oppose the amendment tabled by the noble Baroness, Lady Noakes. Despite her assurances, I believe that it would seriously weaken the government amendments. With this caveats, I welcome what the Government have done.

Lord Joffe: My Lords, I must apologise for not having been in the House when the debate began. I was so busy struggling with the Bill and its surrounding papers that I lost track of the time. Because of that, I will not speak at such length as I originally planned. I speak in support of Amendments Nos. 245A, B and D and welcome the Government's introduction of the amendment.
	The amendments must be read in the context of Clause 158, which deals with the duty to promote the success of the company. I underline Clause 158(1) (c), which states that one factor is the need to foster the company's business relationships with customers, suppliers and others and, perhaps even more important, Clause 158(1)(e), where it is the duty of the directors to consider the desirability of the company maintaining a reputation of high standards of business and conduct.
	In the context of those requirements on directors, it is clear that the amendments partially give effect to those paragraphs. I have some difficulty understanding the opposition to the government amendment. What is proposed is very modest indeed. I do not understand what the big business lobby is afraid of. Are their supply problems so bad that the company's directors do not want even their own shareholders to find out about them? If so, surely it is only right and proper to ensure that there is sufficient transparency for investors, who demand improvements from the companies in which they are members.
	It is well known that fine intentions are not sufficient. For that reason, it is important to pay careful attention and to support AmendmentNo. 245D, which ensures that the requirements of the Bill will have a much better chance of being implemented if companies are audited.
	As I said, these are extremely modest steps forward and I support the government amendments.

Lord Sainsbury of Turville: My Lords, I believe that I have the right of reply at this point to both the noble Baroness's amendment and that of the noble Lord, Lord Razzall.
	In reply to those two amendments, I say to the noble Baroness, Lady Noakes, that one person's unseemly haste is another person's foot-dragging correction of an error. When we responded to the many queries from business, we were constantly told that this was a good thing. We were never told that this was unseemly haste. It is in keeping with what we have done in this Bill constantly to listen to what people are saying and to respond. The noble Baroness has similar concerns to us about the practicality of this but, if the amendment were accepted, companies would be excused from disclosing any information that the directors viewed as seriously prejudicial to the interests of the company, to the reporting company, or to the other company or person, or contrary to the public interest. This is going far too far towards giving companies a let-out from reporting information that would otherwise be required. It says in effect that any bad news should not have to be reported. That is not an accounting principle that I understand. Some bad news will be prejudicial to the reporting company, and it should be. That is not the problem with which we are trying to deal; we are trying to deal with extremist groups who want to use relationships between companies as a way of attacking them. The amendment would be a Trojan horse, which is why we oppose it.
	Our Amendment No. 245B is not a Trojan horse. It is clear what it is; it is about prejudice to the other company, and there is a public interest test which it is perfectly reasonable and practical to have. It is not unusual for directors to have to waiver public interest. The only alternative would be some authority having to do that, which is not a route we want to go down.
	As I explained earlier, we are conscious that information could be damaging to a reporting company if it was known that it was in a relationship with a company engaged in animal testing. In very many cases, that will not need to be disclosed as it will not be essential to the reporting company's business, but if it were, the prejudice would be not only to the reporting company but to the company itself because it would lose the business if the reporting company had to withdraw. Alternatively, the threat might be that the other company would be boycotted if it continued a relationship. Again, that would prejudice the other company. In effect, it would force the other company to choose between the reporting company and its other companies.
	For those reasons, we cannot agree to the noble Baroness's amendment. If Conservative noble Lords think that it is right to oppose this rather modest clause—it is modest because we must be realistic—they should not start making speeches either about corporate responsibility or a duty to shareholders, because this is a very clear example of a proposal that is in the interests of shareholders as well as sensible corporate responsibility.
	I am grateful to the noble Lord, Lord Razzall, for tabling his amendment. As I mentioned in my opening speech, several interest groups have lobbied throughout the course of the Bill for a strengthening of the various provisions relating to the business review. One theme has been standards with statutory backing. It has been very clear—this was emphasised again in the meetings which the Minister and I had earlier this week with representatives of the CBI and others—that business groups do not want statutory standards. We agreed that they would not necessarily be helpful to what we are trying to achieve. We want to encourage directors to think about the issues on which they are reporting; we do not want to encourage a box-ticking culture. We think that the provisions in Clause 399 provide a framework for reporting with sufficient flexibility to enable the directors to determine what information is it is necessary to include. This will vary from company to company, depending on their size, the complexity of the businesses and their particular circumstances. A requirement that any part of the business review must comply with statutory standards would take away the directors' judgment about what information it is relevant to include. Companies would have to follow a statutory standard when reporting key relationships.
	As we made clear, the Accounting Standards Board has said that it will update its existing reporting statement to cover the business review. This will provide helpful guidance to companies on the business review as a whole, and will be useful to investors. The ASB's existing reporting statement covers the reporting of key relationships, and I am sure that it will continue to do so. It is also for a company's shareholders to hold the directors to account. If the shareholders want the review to be produced in accordance with particular guidance or standards, it is for them to challenge the directors.
	I should say to those who have rather emphasised the modest quality of our proposal that we want something that is realistic to which directors can be held. We do not want something that simply sounds nice but is totally impractical. People should focus on the fact that many large businesses today will have 2,000 or 3,000 suppliers spread across the globe. The idea that it is sensible or practical to ask those companies to give definitive answers on all the social aspects of those suppliers' businesses is simply unrealistic. We can demand it, but no one should think that it is sensible and realistic and will further the cause of social responsibility.
	I ask the noble Baroness and the noble Lord to withdraw their amendments. Both of them come from different angles and neither is helpful to Amendment No. 245, which we have proposed, or to Amendment No. 245B, which makes a sensible amendment to Amendment No. 245 to deal with extremist groups.

Baroness Noakes: My Lords, I apologise to the Minister for seeking to deny him a response to the debate. That was not my intent: as I am sure he will be aware, we are as keen to get to the end of our consideration of Commons amendments as he is.
	I think I was saying that I was not going to take too much of the time of the House to respond to individual points made in the debate, but I want to make our position clear. We are not against socially responsible disclosures, and I would not want anyone to seek to paint my amendment in that way. I do not believe that the Government's amendments will require very much disclosure on the part of the companies from whom most of the NGOs want disclosure. That is a consequence of the Government's wording. I do believe, however, as I tried to set out, that harm may well be done to smaller quoted companies by having to disclose matters that might involve either violent protesters or commercial harm. That was the basis on which I judged it right to table an amendment to seek to narrow those disclosures for those smaller companies that could be seriously affected by this.
	The Financial Reporting Review Panel is there to police any disclosures. Although people talk about a Trojan Horse approach and companies trying to evade proper disclosure, arrangements are already in place to ensure that it takes place. There is also a power to amend the disclosure requirements should it become necessary later. We do not think that our amendments are unreasonable. Although they offer important protection to a relatively small number of companies, they are ones that deserve protection.

Lord Razzall: My Lords, the Minister made what I thought was an inadequate argument as to why this amendment should not be passed. So far as I could see, the only substantive point he made was that the CBI and the Institute of Directors do not want it. It may come as news to the Minister that there is quite a lot that the CBI and the Institute of Directors do not want, but that is not normally a reason for the Government not doing something. As I said when speaking to the previous amendment, the major purpose behind this amendment is to ensure that there are common standards so that investors in companies, particularly those who wish to invest on an ethical basis, have a community of standards that they can see from the reporting standards which can only be brought in by the Government. I do not accept the argument that the CBI does not want it as a reason for refuting the arguments which have been made by NGOs. I therefore beg to move Amendment No. 245D as an amendment to Amendment No. 245B in lieu, and I should like to test the opinion of the House.

Lord McKenzie of Luton: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 255 to 257. I shall speak also to Amendments Nos. 260, 262, 273, 283, 284, 286 to 288, 292, 296 to 301, 916, 935 and 1017.
	The first 19 of these amendments remove from the Bill the special rules on the audit of companies that are charities. The final two make similar changes to the Companies Act 1985. In future, the rules on the audit of charities will all be contained in charity law, whether the charity is a company or not. The Charities Bill was amended in another place on Wednesday evening to achieve the same result. We are making these changes to complete changes to the Bill begun during our debates on Report in May, on the basis of amendments put forward by the noble Lord, Lord Hodgson.
	The result will be to complete the process that those amendments started of simplifying the law on scrutiny of the accounts of small charitable companies. These changes will reduce the complexity of this part of company law and also make the rules on audit easier to understand for small charities.
	The Office of the Third Sector carried out an informal consultation, which showed widespread support for the simplification. The changes to the existing Act will enable us to give effect to the simplification early next year, in co-ordination with changes to charity law. I hope the noble Lord will acknowledge that these are not only fine words but a veritable feast of buttered parsnips.
	Moved, That the House do agree with the Commons in their Amendments Nos. 255 to 257.—(Lord McKenzie of Luton.)

Lord Hodgson of Astley Abbotts: My Lords, I am grateful to the Minister for that reassurance. Concern has been expressed, as he explained to the House, that since we made the changes in the Bill here, which were subsequently reversed, the Charities Bill has had a further airing and a power has been inserted in it. Amendment No. 80 to the Charities Bill inserts a new clause in that Bill before Clause 77.
	We are not necessarily unhappy about these amendments because, as the Minister has pointed out, they take all the scrutiny of charity accounts into the charities regulations, which seems sensible. We need to be clear, though, that there is co-ordination between the DTI and the Cabinet Office, the department responsible for charities, on the timing of how this will all happen. I think I heard the Minister say it is all intended to be brought into effect early in the new year. Concern has been expressed that with the power being a power only in the Charities Bill, there may be some temptation, dare I say it, to backslide and say, "It's all frightfully difficult. We'll hold back and put it off for a bit longer". That, obviously, is undesirable. If we do not co-ordinate the two Bills properly, charities will end up subject either to no regulation or to two sets of regulations simultaneously. That is also undesirable. I am seeking a reassurance this afternoon that the Government are on the case on that, and that there is no intention to delay the implementation of the new regime for charity regulation.

Lord Sainsbury of Turville: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 263. Amendments Nos. 263, 265 and 757 are the net result of a series of amendments that have been tabled in both Houses concerning the provisions in Parts 15 and 24 relating to disclosure of information by the Financial Reporting Review Panel and the Takeover Panel.
	It is fair to say that we had not anticipated that these disclosure provisions would attract the degree of debate that they have. They were closely based on existing precedents in financial services and company law. Nevertheless, the debate has been extremely valuable. It has served to remind us of the sensitivities and conflicting priorities involved in any regulatory disclosure provisions such as these.
	We view positively the discussion we have had. It has caused us to reflect on the whole scope of the disclosure provisions related to the Financial Reporting Review Panel and the Takeover Panel and look at them afresh. We have discussed in substance with both the respective panels whether the framework of disclosure provisions strikes the right balance, recognising the need properly to protect confidential information while also facilitating the exchange of such information between regulators and others in certain circumstances. Both they and we have concluded that the disclosure framework properly achieves that balance.
	Moved, That the House do agree with the Commons in their Amendment No. 263.—(Lord Sainsbury of Turville.)

Lord McKenzie of Luton: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 513 to 529.
	Amendments Nos. 513 to 519 combine provisions that have been in the Bill from the outset in relation to debentures with a restatement of relevant provisions from the 1985 Act. There is no change of substance.
	It may be helpful if I explain why there is there no equivalent for the register of debenture holders to the requirement, in Clause 119, for the company to advise those accessing the register the date to which it has been made up. The Bill follows previous Companies Acts in that it does not regulate the content of the register of debentures in the way—in particular, it does not require the register to include dates of becoming or ceasing to be a debenture holder. Therefore, it would be anomalous for companies to be required to provide for the register of debenture holders the sort of information which they have to provide under Clause 119 in relation to the register of members.
	Furthermore, the relationship between the company, the holders of debentures and the holders of interests under any related trust deed are generally regulated by documents which are not part of the company law architecture. It would be excessively regulatory, and possibly wholly inappropriate, to impose an obligation for registers of debenture holders similar to Clause 119 for registers of members.
	Moved, That the House do agree with the Commons in their Amendments Nos. 513 to 529.—(Lord McKenzie of Luton.)

Lord Sainsbury of Turville: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 537 to 558.
	Part 21 is concerned with the certification and transfer of shares and other securities. I am pleased that there has been a broad measure of agreement on these clauses, which both restate existing statutory provision in respect of the certification and transfer of securities and extend the existing power under Section 207 of the Companies Act 1989 to require, as well as to permit, the paper free holding and transfer of company shares.
	I remind noble Lords of the background to this part. The Government have welcomed the work of industry groups, which are looking at options for greater use of paper free holding and transfer of shares. Responses to the Company Law Reform White Paper of March 2005 showed strong support for this initiative, but it is also clear that more information is needed on the costs and benefits of making a more extensive use of a paper-free approach. The Government do not wish to rule out any option at this stage and therefore propose to extend the existing power relating to evidencing and transferring securities without a written instrument under Section 207 of the Companies Act 1989, so that it could be used to require, as well as to permit, the paper-free holding and transfer of company shares. If the power were used in this way, the Government would wish to ensure that the new arrangements for paperless holding and transfer of securities did not deprive individual shareholders of existing rights which may be important to them.
	As the Economic Secretary to the Treasury made clear last month in replying to the recent consultation on this subject by the Institute of Chartered Secretaries and Administrators, a number of issues remain to be resolved before any decision can be reached as to how, or whether, the extended power should be used. I will place a copy of my honourable friend's letter in the House Libraries. We are very grateful for the continuing work of the industry groups that are looking into the practical implications of greater use of paper-free holding and transfer of shares.
	Amendments were tabled earlier with a view to clarifying the relationship between Section 207 of the Companies Act 1989 and the provisions in Part 21 that extend and make further provision in respect of the Section 207 power. We said that we would give serious thought to addressing those concerns by some form of "consolidating" amendment to Part 21. This is achieved through Amendments Nos. 537 to 558. We are satisfied that Section 207 can be repealed, and the new clauses introduced by these amendments brought into force, without in any way affecting existing regulations made under Section 207 and the systems that rely on them.
	The new clauses introduced by AmendmentsNos. 537 to 551 restate provisions of Sections 183 to 189 of the 1985 Act relating to the certification and transfer of shares and other securities. The new clause introduced by Amendment No. 555 differs in two respects from the corresponding clause in the Bill as it left your Lordships' House earlier this year. The clause now makes clear that, where regulations under the clause enable companies to adopt new-style paperless holding and transfer of shares arrangements, companies need not make it obligatory both to hold and to transfer their shares in this way: the new system could relate just to holding or just to transfer. This increases the potential flexibility of the regulation-making power, which is sensible while the precise shape of the proposed new arrangements remains somewhat unclear.
	Secondly, the new clause uses the language of "exercising rights" rather than "giving instructions" in respect of the preservation of existing rights. It is important to ensure that the existing rights of those who are beneficial, but not legal, owners of shares are not disturbed by the new arrangements; and the new wording achieves that better. We are grateful to the Law Society for making comments that have inspired these changes, and to noble Lords opposite who championed similar amendments in Grand Committee.

Baroness Noakes: My Lords, in moving Amendment No. 954A to Amendment No. 954, I shall speak also to Amendment No. 957A, which deals similarly with Amendment No. 957.
	The amendments made in your Lordships' House apply the Freedom of Information Act to two bodies to which certain audit functions of the Secretary of State will be delegated. Amendment No. 954 deals with the independent supervisor for audits carried out by the Auditors General. The more important amendment is Amendment No. 957, which deals with the Public Oversight Board, which as the Minister has explained, deals on the Secretary of State's behalf with all other auditors of Companies Act companies.
	The Public Oversight Board, through its Audit Inspection Unit, examines the audits of listed companies and other important entities. The audit quality reports from these investigations remain private. Only the blandest summaries see the light of day. I explained this when we previously debated the matter in the House. The corporate governance rules which apply to listed companies positively require audit committees to make judgments about the effectiveness of their auditors every year, as part of the annual process of reappointing them, and of course from time to time companies put audits out to tender and consider new auditors.
	I must say that a man from Mars would think it extraordinary that we have two completely separate systems—one where individual directors have to make quite difficult decisions about audit quality and effectiveness, and another system of appraisal of audit quality, but with absolutely no connection between the two systems. As the chairman or as a member of an audit committee I can get no information from the Public Oversight Board that helps me make to make the judgments on behalf of the companies in which I am a director. Indeed, I was told by the senior partner on one of my companies that if I ask him for the report from the audit inspection unit, the Public Oversight Board tells him that he cannot reveal it. So I and my fellow directors are being asked to fly blind.
	The Freedom of Information Act may not be a perfect solution to getting more transparency, but I would feel much less passionate about the need to have this additional power if I thought the Public Oversight Board was going to move voluntarily in the direction of transparency. In June it issued a consultation document, setting out some options for releasing more information. "Consultation" is a bit of a misnomer because no attempt was made to consult directly with individual companies or their audit committees.
	A couple of months later, in late August, a letter was sent to some chief financial officers asking them to pass this so-called consultation on to their audit committees. I do not know how effective that was because I received one such communication, and I sit on the audit committees of four listed companies. The noble Lord, Lord Sharman, who is not here, has a similar story to tell on that.
	Putting that on one side, the consultation proposals did not come close to giving the kind of information that I have explained that we need. Auditors are not hiding behind this. At least one of the big four would value its transparency and those in the second tier would positively welcome the greater credibility that they believe that the release of those reports would give them. In the context of a very restricted audit market, that should not be underestimated.
	The Minister said again that we should wait for the Department for Constitutional Affairs to make up its mind about whether that should be extended. The right time to make a decision is when we are considering individual bodies to which Secretary of State functions are directed. That is what the Bill will do when enacted. The Secretary of State will pass his functions to those bodies. When he does so, the Freedom of Information Act stops applying to his functions. We should not let that continue. I beg to move.
	Moved, as an amendment to the motion that this House do agree with the Commons in their Amendment 954, leave out "agree" and insert "disagree".

Lord Lee of Trafford: My Lords, I support the noble Baroness in her amendments. I acknowledge that I have come to this Bill somewhat late in the day, having been introduced to your Lordships' House only in mid-June—later than expected, I have to say, because, apparently, audit reports on certain prospective Peers were rather less than unqualified.
	I must declare a number of interests, having been a chartered accountant for more than 40 years—albeit never in practice—having been on the boards of a number of public companies of various sizes and the chairman and member of a number of audit committees. In recent years as a private investor I have focused on the smaller established public companies and write a regular monthly column on my portfolio activities for the Financial Times.
	In preparation for this debate, I have looked back at the Hansards covering the passage of the Bill through both Houses and at the debates on the Freedom of Information Bill itself. In opening the first debate on the Freedom of Information Bill in December 1999, the then Home Secretary, Jack Straw, said:
	"Moreover, the Bill will not only provide legal rights for the public and place legal duties on Ministers and public authorities, but will help to transform the culture of Government from one of secrecy to one of openness. It will transform the default setting from 'this should be kept quiet unless' to 'this should be published unless'.—[Official Report, Commons, 7/12/99; col. 714.]
	We contend that the Professional Oversight Board for Accountancy—an operating body of the Financial Reporting Council—is the equivalent of a public authority. Hence, its reports on accountancy firms should be made public unless there are very good reasons to the contrary.
	Having examined the record, I have not read any compelling reasons against the openness and disclosure that bringing the POBA within the provisions of the Freedom of Information Act would provide. We should be embracing ever-greater transparency.
	There is an assumption that the amendments are solely about the standards and procedures of the big four accountancy firms. Although it is obviously true that they dominate the auditing landscape, especially for the larger capped stocks, in the world in which I operate, many smaller capped stocks are audited by a range of professional firms—obviously including the big four, but embracing many others. My role on audit committees, especially in the beauty parade of accountancy firms to which the noble Baroness alluded, would be considerably enhanced by independent assessment of their procedures and operations that I could access. We therefore support the amendments.

Lord Patten: My Lords, I strongly support what my noble friend Lady Noakes said from the Front Bench and what the noble Lord, Lord Lee of Trafford, said. I should declare that I regularly read his column in the Financial Times, although I do not think that the rules of transparency demand that I should reveal whether I have ever followed his investment advice or, indeed, profited or lost as a result of doing so.
	I have only two points to make. First, my noble friend Lady Noakes is surely right that it is correct to try to help audit committee chairmen and members to fulfil a very difficult and demanding task, as anyone who has served on those committees will attest. It is therefore reasonable to request that the prognostications of the Public Company Accounting Oversight Board be made available in the way that has been suggested. Of course I accept what the noble Lord, Lord Grabiner, said about no audit committee member being able to be held to have misdirected themselves or to have behaved incorrectly because they did not take into account something that they did not know existed. I fully understand that. Turning the argument on its head, the views of the Public Oversight Board should be made available to audit committees so that members can be informed of its conclusions.
	My second point—I have no commercial interest to declare; I was never clever enough to be a chartered accountant—is that business in this country is looking at an accountancy market that may well shrink. That will be very bad for commercial activity in this country. The big four are tip-top organisations, and I have benefited from their advice from time to time, but lots of companies in the second tier—for example, BDO Stoy Hayward, Grant Thornton or Robson Rhodes—would also benefit from the dissemination of information in widening the market so that we are no longer so over-reliant on the big four companies.
	My noble friend Lady Noakes is absolutely right in wishing to press this issue. Although I will follow her guidance, as always, I hope that she will press her amendment to a Division.

Lord Sainsbury of Turville: My Lords, further to what the noble Lord, Lord Grabiner, has said, it is by no means certain that applying the Freedom of Information Act to the POB would result in all Audit Inspection Unit reports being available. One of the reasons for doubt is that the AIU may have a strong argument that its reports fall within the exemptions in the FOI Act. For example, the inspection process relies on openness and candour on the part of the inspectors and audit firms, and the prospect of reports becoming public would reduce that candour, damaging the system to an extent that would outweigh the public interest in disclosure. We have heard that argument a lot of times in different contexts, and it seems totally applicable here.
	The impact on how inspections are carried out is the main argument against disclosing the reports. The concern is that if the reports were published, audit firms would take a more defensive and legalistic approach to the disclosure of information to inspectors, and inspectors might feel that they had to be more circumspect in their criticism. The key objective of the inspection system is to improve audit quality through a constructive and collaborative process aimed at best practice rather than minimum standards. That could be undermined if the process became more formal and confrontational. Publication of results could encourage a rules-driven, litigious approach that would have the reverse of the desired effect of an inspection regime that improves audit quality through constructive dialogue.
	As noble Lords may be aware, the Public Oversight Board has consulted over the summer on disclosure by the AIU, and it is likely to report on the results soon. I understand that there was a good response from companies and members of audit committees, as well as from audit firms and professional bodies. The consultation document's main proposal was that the AIU's main report would include a section about a named audit firm if that firm had not made sufficient progress in addressing AIU recommendations. I understand that roughly three-quarters of respondents, including audit committee members, favoured either this proposal or no change from the current approach of never naming individual audit firms.
	It is very doubtful whether the reports would be available. The arguments for not publishing them are remarkably persuasive. On that basis, I urge the noble Baroness not to press her amendment.

Lord Sainsbury of Turville: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 957. I spoke to this amendment with Amendment No. 954.
	Moved, That the House do agree with the Commons in their Amendment No. 957.—(Lord Sainsbury of Turville.)
	957A moved, as an amendment to the Motion that this House do agree with the Commons in their Amendment 957, leave out "agree" and insert "disagree"

Baroness Noakes: My Lords, I spoke to this amendment with Amendment No. 954A.
	Moved, as an amendment to the Motion that the House do agree with the Commons in their Amendment No. 957, leave out "agree" and insert "disagree".—(Baroness Noakes.)

Lord Sainsbury of Turville: My Lords, I beg to move that the House do agree with the Commons in their Amendment Nos. 959 to 968.
	These amendments fall into two broad categories. Amendments Nos. 959 to 968, 970 to 979 and 1,023 to 1,025 seek to ensure that the transparency directive is implemented effectively and on time. The transparency directive will help to improve access to capital markets across the EU and ensure that investors have access to better information when they make investment decisions. Amendments Nos. 959 to 968, 971 to 979 and 1,023 to 1,025 amend the Financial Services and Markets Act to give the FSA the power to implement fully the transparency directive by making transparency rules.
	While there is a general rule-making power, some of the particular provisions referred only to "voting" shares and not to obligations applying to other classes of issuers of traded securities required by the transparency directive. It was identified that this use of particular provisions for one class of security could lead to confusion as to how the clauses operate. To avoid any such confusion, these new amendments clarify the relationship between the general and particular provisions and make it clear that the particular provisions apply, as appropriate, to all the classes of issuer required by the directive. There are also some other minor adjustments to ensure that the wording of the clauses reflects clearly other particular provisions from the directive.
	Amendment No. 970 deals with transitional arrangements and ensures that the Financial Services Authority consultation on transparency rules meets the requirements for consultations on proposed rules set out in Section 155 of the Financial Services and Markets Act. This is necessary to enable the Financial Services Authority to make transparency rulesthat come into force from the day on which the directive must be implemented into national law—20 January 2007.
	I now turn to Amendments Nos. 980 to 987 and 1,026, which deal with liability for false or misleading statements in reports and statements publishedin response to a provision implementing the transparency directive, or otherwise. The background to these amendments is the Government's decision during the passage of this Bill, strongly supported by a wide range of stakeholder opinion, to introduce a statutory liability regime to cover disclosures required by the transparency directive and narrative reporting by UK companies. This was necessary to remove uncertainty about the liability regime, which risked constraining important disclosures by companies—for instance, in the narrative reports to be included in annual reports—thus reducing both their effectiveness and the accountability of directors. Accordingly, following discussion with stakeholders, liability provisions were introduced at the Report stage in this House.
	Amendment No. 984 ensures that it is clear what liability regime would apply to potential as well as actual investors with regard to losses arising from reliance on periodic financial information disclosed under the transparency directive.
	Amendments Nos. 980 to 983, 985 to 987 and Amendment No. 1026 address issues that were raised with the Government by consultation. It was suggested in another place that the liability regime should be clarified across a wider scope. The Government consulted on this over the summer and specifically asked whether liability should be clarified in respect of disclosures made under the FSA's disclosure rules, preliminary announcements of results, disclosures made by companies with securities quoted on the alternative investment market, and transparency disclosures by companies admitted to trading on an EEA-regulated market in situations where UK law is applicable.
	When considering the issue of extending the liability regime to disclosures made under the FSA disclosure rules, the emerging consensus from consultation was that issuer liability is an extremely complex area in which it is vital that the Government get their policy right. Most responses said that an extension of the statutory regime was, in principle, desirable. However, there was no consensus on what the right policy would look like. Importantly, the consultation raised the point that, while the existing provisions in the Bill are there largely to produce certainty as to issuer liability for documents published in accordance with the transparency directive, these provisions, along with other provisions in the directive requiring disclosure of relevant information in all EEA-regulated markets and other developments in securities law, combined to make the existing common law position on issuer liability for other published financial documents increasingly uncertain.
	The effect would be to restrict severely the content of issuers' annual reports and other regular publications to the market. Such a development would not be in the interests of a well functioning market. It is also necessary to consider the possible effects for the UK as a whole of any developments in common law that would increase the liability of issuers for any financial publications that they may make. It is necessary that very careful consideration be given to the consequences. This is a very complex area of law and public policy.
	Amendments Nos. 987 and 1026 therefore give the Government the power to make further provision about liability for published information. This will enable us to make appropriate provision once further consideration has been given to the shape that such a liability regime should take. We recognise that this is a wide power, but stakeholders consider that it is important that provision should be made, and, subject only to what I am about to say about the review, the Government have already announced that we agree.
	This power has also been subject to scrutiny by the Delegated Powers and Regulatory Reform Committee, whose consideration is that the subject matter of the power is sufficiently circumscribed to make the power acceptable in the light of the affirmative procedure provided.
	The Government have announced that Professor Paul Davies QC, the Cassel Professor of Commercial Law at the London School of Economics, is to conduct a formal review of the liability of issuers in respect of damage or loss suffered as a consequence of inaccurate, false or misleading information disclosed by issuers or their managements to financial markets, including to their own shareholders or bondholders, or of failure to disclose relevant information. This will take into account both existing regulatory obligations and penalties, including criminal penalties, and the potential for liability in damages under existing common law jurisprudence. The review will also need to look at the position in other EU member states and more widely in the jurisdictions of other substantial financial services markets.
	If Professor Davies' review recommends that the Government either implement a statutory liability regime for financial disclosures or make changes to the regime that we are putting in place to deal with financial publications required by the transparency directive, the Government will hold a full consultation on the Government's response to the review's proposals, with a full regulatory impact assessment of these proposals, and legislate for the new regime using the powers proposed.
	Of course, it is possible that the review could recommend that no changes at all are required. Most responses to the Government's consultation also supported an extension of the liability regime to cover a preliminary announcement of results. It was argued that in practice these contain the same information as in annual and other reports required to be published by the transparency directive, and therefore captured by the statutory liability regime.
	It was also argued that excluding the preliminary announcement of results from the scope of the liability regime would cause issuers to cease publishing them. Investors pointed out that they regard preliminary announcement as highly useful. Amendments Nos. 980 and 981 extend the liability regime to preliminary announcement of results. Nevertheless, in the light of the obvious existence of uncertainties surrounding an extension of the liability regime to disclosures made under the FSA disclosure rules, Amendments Nos. 980 and 981 ensure that any extension of the liability regime to preliminary announcements does not extend to all information contained within a document entitled "preliminary announcement", and is instead restricted to that information in the annual report, which the preliminary announcement properly presages. I should add that the extension is not set in stone. The power I have just discussed will enable the extension of the liability regime to preliminary announcements to be adjusted in the light of the outcome of Professor Davies's review.
	Stakeholders also pointed to some confusion over how the liability regime as currently expressed in the Bill would apply to certain situations where either the issuer or the investor was situated in the EEA but outside the UK. In order to clarify that, Amendments Nos. 982, 983 and 986 change the territorial coverage of the statutory liability regime to ensure that the regime covers securities of all issuers for which the UK is the home member state, as well as to cover those issuers whose securities are traded on a regulated market situated in the UK and for whom the UK is the host member state. UK holders of security of other issuers—that is, those for whom the UK is neither a host nor a home state—will not be able to rely on the rights of action set out.
	One further issue that was raised in response to the Government's consultation was that the wording of the Bill as it stands makes senior officials, not just directors, responsible for issuers' financial publications. Government policy is for only directors of companies and senior officials of issuers that are not companies to bear liability. Amendment No. 985 clarifies the wording of the Bill in that area.
	Moved, That the House do agree with the Commons in their amendments 959 to 968.—(Lord Sainsbury of Turville.)

Lord Hodgson of Astley Abbotts: My Lords, within this group I have two amendments, Amendments Nos. 984A and 984B, to disagree with Amendment No. 984 and insert different wording. Amendment No. 984B is not quite as draconian as it appears, because the latter half of the amendment is the same. It just has these words at the beginning,
	"and provided that this subsection shall be without prejudice to the rights of any person which have accrued prior to this section being brought into force".
	As I understand it, the Government's intention in subsection (2) is to confer the benefit of the new statutory compensation regime only on persons who, first, have acquired securities and, secondly, who have suffered loss as a result of relying on a publication containing an untrue or misleading statement or omission made knowingly or recklessly.
	Subsection (5) eliminates whatever common law other rights shareholders or any other persons may have, save as provided in subsection (7). As a result, subsection (5) will eliminate the rights of a much wider category of persons than will be protected by the new compensation regime in subsection (2). While that may be acceptable looking forward from the date the regime takes effect, it would not be appropriate for it to operate retrospectively so as to eliminate accrued rights of shareholders and other persons. The effect of the amendment is to preserve those accrued rights, including those of existing shareholders whose rights will be eliminated by the new regime. Although it is a principle of statutory construction that a statute should be presumed not to apply retrospectively unless the contrary intention appears, it is preferable to make the position clear in the statute in order to avoid any uncertainty.
	The new liability clauses were originally in symmetry, but following an amendment introduced by Margaret Hodge in Committee in the other place on 6 July, that symmetry was lost. The upshot of this appears to be to confer compensation rights on non-shareholders who acquire shares on the basis of untrue and misleading transparency disclosures and at the same time take away whatever rights existing shareholders may have in respect of such untrue misleading statements. We argue that this is surely a counter-intuitive outcome. In any case, the Government should ensure that the common law rights of existing shareholders, which will be eliminated by the new regime, should be within the remit of the forthcoming review of the liability compensation regime by Professor Paul Davies to which the Minister referred.

Lord Hodgson of Astley Abbotts: My Lords, I beg to move, as an amendment to the Motion that the House do agree with the Commons in their Amendment No. 988, leave out "agree" and insert "disagree".
	I shall speak also to Amendments Nos. 989A to 991A. We return to familiar ground and the case has been summarised by the Government that a reserve power is needed to compel financial institutions to disclose to the world at large, not their clients, how they have voted their shares. On these Benches, we argue that not only is this power unnecessary, it is undesirable on technical, practical and philosophical grounds, especially when it comes from a Government who keep stating and showing their deregulatory colours.
	We debated this issue at some length in Grand Committee and it came to a head on Third Reading on 23 May, when the House decided to strike out this provision from Clause 865. The provision has now been reinstated with four clauses, rather than one. To be fair to the Government, Amendments Nos. 989, 990 and 991 attempt to provide clarity on some of the technical aspects of the proposal. We are grateful for that.
	We note that financial institutions can now have the necessary information disclosed on their behalf by their agents and that disclosure can now be of voting intentions given. Finally, under Amendment No. 991 at subsection (5)(b), an institution will have to disclose only an aggregate of all its voting in respect of an individual company. But that destroys the value of the whole exercise.
	Consider the position of a major fund manager who manages a series of unit trusts, investment trusts and pension funds for some of which he has responsibility in deciding how to vote and for others where the client has retained that right but has delegated the disclosure to the manager. We could then have a ludicrous situation where, for a major company, say, Marks and Spencer, a fund manager would have to report that in respect of a particular resolution at an AGM it voted, say, W shares in favour, X shares against, abstained on Y shares, while Z shares were not voted on at all. The fund manager would not even have taken the decision in respect of some of those shares.
	In practice, this remains a valueless exercise but is also likely to give rise to our old friend the law of unintended consequences as outsiders and third parties seek to draw unwarranted conclusions from the figures disclosed. The House should be aware that there is already a trend towards greater public disclosure. The Investment Management Association, whose 35 members look after 62 per cent of all UK equities, reports a steady increase in the number of their members reporting publicly—three years ago it was seven, last year it was 10 and now it is 12. Hermes, which manages the huge British Telecom and Post Office pension funds is about to join, making 13 in all.
	If the Government proceed with this clause, that momentum may well be stalled. Why spend money and resources on developing disclosure procedures that may well not fit with the regulations that are produced? It may be better to sit on one's hands and see what will be required by statute.
	Disclosures, as, I think, the Minister accepts, are complex and do not fit with a one-size-fits-all requirement. The IMA's 2005 annual survey of fund managers' engagement analysed voting details that had been published on websites. The 12 managers that currently disclose publicly used a wide variety of ways of disclosing.
	Some give narrative reasons as to how they voted in a contentious situation; some give narrative reasons for voting against, or consciously withholding their vote; some give no explanation at all. This wide variation in the matters reported indicates the complexity of the area and the difficulty of introducing a one-size-fits-all legislative requirement, which would only serve to undermine the progress made to date.
	Furthermore, those that analyse the issues give narrative reasons to do so, in order to provide a clear picture to users. By contrast, legislative requirements would be likely to result in mechanistic, meaningless reporting. If regulations are made to require voting disclosure, there is a risk that managers could be discouraged from voting. Far from engaging with shareholders, as the Minister thought, the reverse could happen. That could in turn lead to some managers choosing to get round the disclosure requirement by not voting, which cannot be what the Government seek to achieve.
	The killer blow to these amendments comes not from the City or, indeed, from the Opposition Benches. It comes from the Minister's colleague, the Chancellor of the Exchequer. He wrote in the FT on 18 October that his aim is to reduce the regulatory burdens by 25 per cent; he has subsequently met a group of leading City figures to discuss that objective. The Economic Secretary to the Treasury, Ed Balls MP, in a speech to the City of London on 25 October said:
	"And it is this commitment to openness and internationalism, our light-touch and risk-based regulatory approach—combined with the great pool of talent gathered from across the planet—that underpins London's success as a modern international financial centre".
	Clearly, the left hand of the Treasury has no idea what the right hand of the DTI is doing. We on the Opposition Benches are happy both to be the messenger between the two departments and—on this occasion, at least—to help the Chancellor of the Exchequer achieve his objective. I beg to move.
	Moved, as an amendment to the Motion that the House do agree with the Commons in their Amendment No. 988, leave out "agree" and insert "disagree".—(Lord Hodgson of Astley Abbotts.)

Lord Sainsbury of Turville: My Lords, I beg to move the House do agree with the Commons in their Amendments Nos. 995 to 1029, to which I have already spoken.